Rental Property Investor · Eldersburg, MD · Member since 2018 · 9 posts · 2 votes
Hello,
I am following up to my early post regarding using a 401K loan for REI. In hindsight, I wish I kept some money out to use for other investments, but I was always very diligent about contributing to my 401K. Five years ago I left that large employer and am now an independent consultant. I currently have a rollover IRA and a SEP IRA through T Rowe Price. The SEP is tied to my LLC for my consulting business of which I am the sole owner.
Are there any provisions to take a personal loan from either the rollover IRA or the SEP IRA that I can use for REI. Unfortunately, I've tied up a lot of my money in those funds before deciding to get into commercial REI. I don't really want to do the self directed IRA approach because I want to buy and hold eventually for income, not just inside my retirement account(s).
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
8y
Eric,
you can not take a loan from an IRA (any IRA). The solution will be to setup a Solo 401k plan, rollover your existing IRAs into it and then take a loan from the 401k.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
8y
Eric,
you can not take a loan from an IRA (any IRA). The solution will be to setup a Solo 401k plan, rollover your existing IRAs into it and then take a loan from the 401k.
IRA plans do not allow for loans to the participant. It sounds like you might qualify for a Solo 401(k). Those types of plans do allow for a participant loan of the lesser of $50K or 50% of the account value.
You do not need a self-directed Solo 401(k) if your only interest is the loan. Just go to a mainstream brokerage. Not all support the loan but a few do. Last time I checked E*Trade and UBS do.
401ks allow for loans, but IRAs do not. A self-directed Solo 401k will provide the most flexibility, but if you have no interest in investing retirement funds into alternative assets, Brian's suggestion could work for you. Are you ok with your funds being limited to the stock market?
Be careful with using your Ira funds as “collateral” at the brokerage houses. That most likely would be prohibited and disqualify your Ira and you would be penalized as well as paying taxes.
You may be able to use your Ira and take distributions for income prior to being 59.5 years old. Google/Checkout 72t distributions and Substantially Equal Periodic Payments-also IRS pub 590. If you need more info on this strategy PM me.