Looking for CPA to help with 401K questions and guidance.
I am trying to decide how to use the money in my 401K to invest in rentals. It looks like my best bet is to liquidate the account to use the money but would like a confirmation before doing that. I want to have access to the cash flow to quit my W2 job. Any advice I will take. Thank you all for your time.
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#2 Tax, SDIRAs & Cost Segregation Contributor
- CPA, CFP®, PFS
- Florida
You can borrow up to 50k or 1/2 of the vested balance than withdrawing the money.
Johnny, if you liquidate your 401k, you'll be subject to a 10% early withdrawal penalty plus income tax on whatever you take out. If you have a large sum in the 401k, this would be a horrible idea, you'd likely jump up multiple tax brackets for the year. But if you're willing to pay the additional taxes in order to have the freedom to quit your job, that's up to you. You can take a loan from your 401k like Ashish mentioned, but you'll have to pay that borrowed money back, plus interest, within 5 years of taking your loan, in most cases. You could quit your job and roll it over into a self-directed IRA to invest in real estate, but any profits would have to roll back into this IRA. You could quit your job and roll your 401k into a roth ira to avoid the 10% penalty, and withdraw CONTRIBUTIONS tax free after 5 years (not earnings).
Do not liquidate the account. I help people access capital in their retirement accounts to secure more cash for real estate investing. I'll send you a connection request and help you make a plan.