Investor · Phoenix, AZ · Member since 2019 · 31 posts · 16 votes
Hi everyone! I'm starting a job at a company that will match my contributions made to a 401k or Roth 401k. I'm trying to figure out the best avenue so that I can use the money in either account to fund real estate investments. Obviously, I want to take advantage of the company match because that is essentially free money.
My question is, which plan is going to be more beneficial to fund? The 401k money goes in pre-tax whereas the Roth is going in after-tax. However, I get lost when it comes to the rules of each account and early withdrawals. From my understanding, I should be able to get a loan from my 401k account up to 50% or 100k, whichever is greater. Does the Roth allow me to do this as well? Are there any other ways that I might be able to use my 401k or Roth 401k as collateral in order to get a loan? I also know the benefits of having a self-directed IRA so that I can invest my funds how I please, but is it even possible for me to rollover my 401k or Roth into a SDIRA? Any bit of advice would help. Thank you!
You will not be able to invest in real estate with your employer 401k, your investment options are limited to those offered by your 401k custodian. You need self-directed IRA (or self-directed Solo 401k) to invest in alternative assets.
You will not be able to rollover funds from your employer 401k to self-directed IRA at this time. Usually you have to wait until you reach retirement age, or leave that employer before you can rollover.
Generally speaking Roth is more beneficial since you can grow your investments tax-free for the rest of your live, this would be especially beneficial for someone younger like you. However you don't have any tax deduction now. So you have to weight the options and decide what is more important to you.
You should be able to take the loan from your Roth 401k account, but it depends on the plan rules, talk to your 401k plan administrator, that is the only sure way to get the accurate answer.