Use 401k for investments

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Use 401k for investments

Kelly Shipman
Summerville, SC · Member since 2016 · 3 posts · 0 votes

Has anyone used a company to roll your retirement accounts into, and were able to access your funds to invest in real estate? I've seen several companies who do this, but would like advice if you have already taken this path. Thank you

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Mark S.
Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
8mo

@Kelly Shipman Keep in mind that you are converting long term capital gains into ordinary income (in a traditional IRA) and that RMDs may become an issue, depending on your age.

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  • Brett SynickyPro Member
    Solo 401k and SDIRA Consultant · Orange, CA · Member since 2013 · 875 posts · 498 votes
    8mo

    @Kelly Shipman

    There are lots of posts on BP about self directing using a Self Directed IRA or Solo 401k. 

    Each have different benefits but both can be directed into alternative assets like real estate and much more. 

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  • Mike Kirby
    Rental Property Investor · New Braunfels, TX · Member since 2021 · 289 posts · 256 votes
    8mo
    Quote from @Kelly Shipman:

    Has anyone used a company to roll your retirement accounts into, and were able to access your funds to invest in real estate? I've seen several companies who do this, but would like advice if you have already taken this path. Thank you

    I used The Entrust Group as my custodian for my self directed IRA. The most important things you need to do in my opinion is:
    1) Get checkbook control (If you don't the fees will nickel and dime you to death and the delay from when you need money until you actually get it can break a deal)
    2) Learn all about prohibited transactions.

    3) Use a lawyer to set up your Articles of Organization for your LLC.

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  • Mark S.
    Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
    8mo

    @Kelly Shipman Keep in mind that you are converting long term capital gains into ordinary income (in a traditional IRA) and that RMDs may become an issue, depending on your age.

    1Reply
  • Brett SynickyPro Member
    Solo 401k and SDIRA Consultant · Orange, CA · Member since 2013 · 875 posts · 498 votes
    8mo

    @Mark S. Good point about RMD's. As people approach that age (currently 73), it's important to plan accordingly. 

    1. Enough cash in Traditional IRA's/ and each 401k to satisfy RMD. Liquidity is key, don't wait till the last minute to have to sell a property or other asset just to satisfy the RMD.

    2. "In-Kind" distributions of an asset in whole or partial can be taken to satisfy RMD. i.e. Plan owns a rental and the plan owner wants to eventually own it for personal use. Distribute 25% (or whatever amount needed to satisfy RMD) per year until it's wholly owned by the plan owner. Important to note, the asset MUST be 100% owned by the person before personal use of any type is allowed.

    3. Roth of course is NOT subject to RMD for plan owner only, beneficiaries (10 year rule) will still have to take them. Therefore strategic (not all in one year) Roth conversions can be very powerful when planning. 

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  • Jason MalabuteBusiness Member
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 904 votes
    8mo

    I have a few clients who use a ROBS approach to invest in businesses and real estate, but it’s important to be very careful with how it’s set up and maintained. Be very careful—especially if you’re considering a ROBS (Rollovers as Business Startups) structure.

    At a high level, a ROBS is not just “using your 401(k)”. It requires setting up a C-Corp, maintaining strict ongoing compliance (annual valuations, payroll, corporate formalities), and ensuring the investment is run as an active operating business. Many investors underestimate the administrative burden and costs. If it’s done incorrectly, the IRS can disqualify the plan, which can trigger immediate taxes, penalties, and interest on the entire rollover amount.

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