Utilizing a 457 Deferred Comp plan and Roth IRA to invest

[Brandon Ingegneri]

I am aware of people utilizing self directed IRA's to invest. I have read here that people use their 401k's also. I personally know of someone who uses his pension plan from a private company to invest with. Here are my questions.

1. Am I able to use money from a 457 deferred comp plan and/or Roth IRA to invest?

2.  If so, what is needed to structure this?

Obviously I know that all money borrowed needs to go back into the plan, and I am assuming that the return on the money would also need to go back into the plans.  

3.  With regard to the 457, I am assuming that taxes would be paid on the money when I ultimately withdraw in retirement as would normally be the case if I were not touching it until retirement.  

4. With the Roth IRA, I would be looking to redeposit my returns. Given the fact that Roth money was invested post tax annually when I qualified, would I need to pay taxes on this money upon the sale of the property, or would this money grow tax free as would all other gains normally made in the Roth outside of a real estate transaction?

[Dmitriy Fomichenko]

@Brandon Ingegneri,

You can setup self-directed IRA and then invest in real estate (or any other alternative investments). Here are few things to be aware of:

• You (personally) do not borrow from your retirement account, your retirement accounts makes the investment. Think of it as your IRA buying stocks, but in this instance your IRA buys real property
• You can't combine your 457, which is pre-tax, with your Roth IRA, which is post-tax
• Just like with any other retirement account you will be taxed at the time of distribution on tax-deferred accounts, or pull distributions tax-free from Roth IRA
• When you sell property (or any other investment) inside of a qualified account (Traditional or Roth IRA) there are no taxes, you are investing inside of a tax-deferred vehicle

Hope this helps!