Specialist · Frederick, MD · Member since 2015 · 12 posts · 2 votes
Hi all,
So I'm looking to fund my REI adventure and am having trouble. My original plan was to get rid of my retirement accounts (I have $35K in an IRA and 401K combined), take the early distribution penalty and use that to invest. I started reading about self directed accounts but they don't totally make sense to me.
Will they allow me to invest all of the money into my chosen strategy (BRRRR)? Are there overall tax savings differences between the two? Is there any way to use the profits as regular income to live off of or will it act as a normal retirement account and I can't truly use the money until 60?
I ask all this because a self directed account seems like a path to having more money to invest now but at the expense of achieving early retirement.
Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
10y
@Michael Garrettyou can get a loan inside an IRA but there are tax considerations. You wont be able to live off the money though, unless you take early distributions. No tax or legal advice, best of luck.
Because retirement accounts are tax shelter vehicles, all the profits must flow back to the retirement account. Once you start taking distributions form the retirement account taxes apply in the case of pretax funds but not with respect to ROTH funds.
You'll want to look into self-directing those accounts, maybe roll the 401(k) into the IRA, then do an IRA LLC and not take distributions, rather invest directly for that.
Talk to your financial professional (I'm not one.)
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice." - DJ Benedict
Real Estate Professional · Dayton, OH · Member since 2015 · 423 posts · 187 votes
10y
Do NOT liquidate your IRA and 401(k). You can own real estate in a self-directed IRA. You can't do it through a brokerage house like Fidelity, but there are a number where you can. Find one, and move your IRA there.
One is Equity Trust. There are others, too. out there like ETC who do the same thing that have much lower fees. (They just don't come to mind right now.)
Seek them out. Do your research. Choose the one that is best for you.
See if you can roll over your 401(k) into your IRA. There is absolutely no reason to liquidate and take a penalty.