401k to Self-Directed IRA

[Karen C.]

Hi everyone! I have a 401k from a previous employer that I would like to transfer to a self-directed IRA instead of my new employer's 401k plan. My hope is to be able to invest in syndication opportunities. I do have a few questions though:

1. Would you recommend it?

2. Can you invest in syndication with SDIRAs? 

3. Are there fees associated with the transfer of money to the SDIRA?

4. What are some good companies that you have used and would recommend?

I've tried to look this up extensively but never really seem to get the answer I am looking for. Really would love to hear from your experience and expertise. Thanks!

[Greg Scott]

Yes, you can do it. Yes, there are costs associated with setting up and maintaining a SDIRA. While there are many on BP that will disagree with my, I wouldn't go this route. I've taking money out of my IRA, paying taxes and penalty, to invest in syndications. Why?:

1. When investing in real estate through an IRA it is very possible you could end up paying more in taxes than if you pay the taxes and penalties to take the money out. When done correctly, real estate investing can already be done tax-free (or more correctly, tax-deferred, but the tax can be deferred indefinitely, including the day after you die and your heirs inherit it without paying tax)
2. The cash flow and profits can be used however you choose without penalty.  When in an SDIRA, the profits need to go back to the SDIRA.  Of course, you could take them out after they are deposited, but then you will pay the taxes before you can use it.
3. My bank doesn't charge me fees for my account but an SDIRA will.
4. Overall, less paperwork.