More Cost Effective Withdrawl: Vanguard Roth IRA vs individual

10 Replies

Which would be the more cost effective account in order to withdraw the most amount of money and be taxed the least for real estate withdrawals? Would it be a Roth IRA or individual brokerage account?

Originally posted by @Steven Gralow :

Which would be the more cost effective account in order to withdraw the most amount of money and be taxed the least for real estate withdrawals? Would it be a Roth IRA or individual brokerage account?

Steven, that is a wrong strategy. 

Roth has restrictions. Generally, you have to have an account for at least 5 years and be of 59.5 years old for tax free withdrawal if there are no rollovers.  Your contribution are always tax and penalty free to withdraw. 

Traditional IRA are both taxable and subject to penalty if you withdraw before 59.5.

Withdrawing from IRA to invest in the RE is not a good strategy. Why not self direct IRA to invest in the RE?

Search here about the self directed IRAs. That might be what you are looking for. 

 

Take the word "withdrawal" from your SDIRA vocabulary until you truly retire and need your retirement savings to live on. A SDIRA let's you invest your retirement savings in individual real properties or notes for example. The properties are owned by your IRA and all the profits return to your SDIRA tax free. There are critical rules to follow which have been discussed in many prior threads on BP. Key is that your IRA doesn't become an open piggy bank. But even with the constraints it's a very effective way to put your retirement funds to use in other than conventual mutual funds, stocks and bonds. So the benefit of a SDIRA is that if you believe you can earn a higher ROI in real estate over conventional IRA investment options, a SDIRA is the only way to access those funds for RE.

I'm not a pro just an average citizen retired investor. Best wishes and happy investing!

Take the word "withdrawal" from your SDIRA vocabulary until you truly retire and need your retirement savings to live on. A SDIRA let's you invest your retirement savings in individual real properties or notes for example. The properties are owned by your IRA and all the profits return to your SDIRA tax free. There are critical rules to follow which have been discussed in many prior threads on BP. Key is that your IRA doesn't become an open piggy bank. But even with the constraints it's a very effective way to put your retirement funds to use in other than conventual mutual funds, stocks and bonds. So the benefit of a SDIRA is that if you believe you can earn a higher ROI in real estate over conventional IRA investment options, a SDIRA is the only way to access those funds for RE.

I'm not a pro just an average citizen retired investor. Best wishes and happy investing!

@Ashish Acharya and @ Glenna Wood I have a m1 finance account. It is considered an individual brokerage account. Is this considered a self directed ira? and are the tax benefits the same? I was told by H and R block that the account with the least tax implications for early withdrawal would be m1 finance, as above in my initial question I referred to it as an individual brokerage account instead of a self directed IRA.


@Steven Gralow

Using your SDIRA account in conjunction with an IRA LLC will allow you more control and reduce your vendor fees for real estate deals. It will cost you more upfront fees to establish an IRA LLC, but the savings in the long run will be substantial. Normally, with a regular SDIRA, you would have to submit a request to your vendor when ever you want to use the money in the account. This will take time (sometimes causing deadlines to be missed) and cost money for each request. Where as with the IRA LLC, you are in control of the funds and don't have to pay a fee for each time they are used. You still need to follow all the rules established by the Fed for using IRA's to make sure it remains tax free.

No.

You're money would need to be in a self directed IRA, which by nature is designed to save on taxes. Next, you would set up an LLC owned by your IRA. This is called an IRA LLC or a Checkbook IRA. You would act as manager of this LLC, and would have the ability to make purchases and sign documents on behalf of the LLC. Having this control allows you to save money on the transactional fees associated with a traditional SDIRA. You can not withdraw money for yourself or for personal purchases. You can only use the money for authorized investment purposes specified by the FED.