401k, IRA, and others

5 Replies

I am expecting to receive my annual bonus, and I would love to invest as much or all of it into real estate, but every year around $7k are taken out in taxes. Where can I deposit my bonus where the least amount of taxes are taken out and I can invest it in real estate as quick as possible. This should be around $20k bonus.

Originally posted by @Alvaro Rodriguez :

I am expecting to receive my annual bonus, and I would love to invest as much or all of it into real estate, but every year around $7k are taken out in taxes. Where can I deposit my bonus where the least amount of taxes are taken out and I can invest it in real estate as quick as possible. This should be around $20k bonus.

Mostly the employer 401k does not invest in real estate so that is out of the picture. The IRA can be self directed to invest in the real estate.

Depending on your income level and your 401k involvement/options from employer, your contribution to IRA is limited. We don't know the numbers.

Also, depending on your income, switching from the non deductible IRA contribution to the Roth contribution makes sense, if you income is low enough to allow you to contribute to the Roth IRA. The reason is that contribution to IRA is deductible if you meet certain income threshold, if you are past the threshold, it's not deductible. If the contribution is not deductible, it's better to contribute to Roth IRA as Roth is tax free when you take out the money.

This gets confusing really fast. Do not hesitate to message. 

@Ashish Acharya thank you so much for the explanation. I contribute to my 401k and my employer match it up to 6%. Salary is $85k a year, but I also receive a $20k anual bonus. I don't wish to deposit my bonus in the 401k because I will max out for the year plus I won't be able to invest it. This will leave us with IRA. Now what would be more appropriate so I don't get taxed so much for my bonus and I am able to use it in real estate as soon as possible?

Thanks again

@Alvaro Rodriguez you can start a self directed IRA right now. However, there are contribution limits. The limit this year for people under 50 is $6,000. More limit info here.

In principle you can basically use that money right away, but in practice, $6k isn't going to be enough to get started.

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