401k to self directed ira?

Question

I'm currently house hacking with an apartment attached to my primary residence camo and my fiance owns her own home that we currently rent out. I'm also partnering with my brother going forward, aimed primarily in the buy and hold strategy with the brrr method.

My current job is ending, and forcing me to roll my 401K into something. I have read a little about a self directed Ira. But it seems like there may be a lot of restrictions. I was hoping for advice on whether it's worth cashing out the fund and paying the penalties, or if the self directed ira is worth the restrictions.

I'm located in Massachusetts, are cap rates are very tight. Any advice on self directed ira's and financial institutions that support them would be appreciated. TIA

Carl Fischer · Answer

@Patrick O'Brien

Don’t cash your account in until you learn more.  So many clients are thankful learning how to make tax free income for life and not pay any penalties. Education is very powerful and rewarding.

Tasha McCray · Answer

Thank you for that information.

Carl Fischer · Answer

@Tasha McCray

I try to do my most lucrative deals in my Roth. I am a real fan of tax free income. However, Tax deferred is better than taxed.

Tasha McCray · Answer

Is it best to loan money from your traditional IRA or roth IRA?

Patrick O'Brien · Answer

Thank you George, I realize I'm asking very basic questions. Unfortunately that is where I am in my educational journey with real estate at the moment. I read a little more into it last night. Where my brother and I are partnering in this venture, it makes me nervous that it will end up being a restricted transaction. The more I read, the more I realize that I don't know. I've decided to take the real estate salesperson class and hopefully start with my real estate license. Strictly for educational purposes at the moment.

Thank you for the time

George Blower · Answer

@Patrick O'Brien

If the real estate investment is done inside the IRA,  all the income and expenses will flow through the IRA. The income will grow on a tax deferred basis since the property would be owned by an IRA. Investing an IRA in real estate is another way to grow your retirement account.

If you were to cash out your 401k plan, taxes and the 10% early distribution penalty will apply. Therefore, you would have less funds to place the real estate investment outside the IRA, but you would be required to have the income flow back to the IRA since you would have purchased the property outside of the IRA.

401k to self directed ira?

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