Cashing out your Roth and Mutual Fund IRA’s

7 Replies

This is my first post to the BP forum. I’m a newbie here and have spent the past several weeks reading, learning, and listening as much as I can! I haven’t officially introduced myself yet, since my husband and I will be moving soon, but don’t know where yet (retiring from the military). I’ll definitely do it as soon as we know, so that I can make it easier to get connected with local people. My husband and I are ready to get out of the Rat Race and the middle class mindset and get into real estate investing. (Thank you, BP!!) My question is: who here has cashed in their Roth and/or mutual fund IRA’s to begin REI and never looked back? Obviously there will be tax implications, but I think we’re willing to take the hit if this could give us a good jump start.

Updated 9 months ago

Yikes! I was having difficulty with my app and wound up posting the same thread 3 times. So sorry!​

@Colleen Jobe

Welcome to BiggerPockets and thank you for your service in the military!

In my personal experience, I wouldn't recommend you cash out your Roth and mutual funds/ retirement accounts. Did you know you could use your IRA/ Roth/ Retirement account to invest in real estate? There are many investors who have found success using the IRA to own/hold real estate investments. You can do this through the use of a self-directed IRA.

I would be happy to connect and discuss more if you have any questions.

@Carl Fischer

Thanks for your reply! I'll connect with you and send you a message, as I do have a few questions about the SDIRA. 

@Colleen Jobe

Your welcome. Send a PM or call the office number in my profile. We will be glad to help. 

Roth IRAs are gold, in my opinion. Keep that for regular securities investments. Regular IRA's however, I think are overrated, especially if your income will be high in retirement years. I did cash mine out as soon as I turned 59.5, paid the tax (ouch!) and bought real estate. Between cash return on rent, leverage and depreciation deductions, I think it most likely will pay off long term. Kept my Roth IRA right where it was though.

Colleen, first THANK YOU both for serving in the military for our great country. Second, you mentioned you are moving. Are you selling your home? Do you have equity (cash) in your home that you can utilize to buy a duplex in another city? House hacking is awesome-sauce! Good luck, dive in, and keep reading for sure!

@Colleen Jobe

If you do deiced to distribute Roth IRA funds, you may want to consider only distributing the basis since you have already paid taxes on those funds, so the 10% early distribution penalty would not apply. To learn more about the Roth IRA distribution rules, see the following.

https://www.irs.gov/publications/p590b

Thanks, guys, for all that good advice! 

@Christian Chevier - we do have quite a bit of equity in a home we own in KS, and have been renting out for several years. It's on the market to sell (for nearly 90 days now...argh!), but we're hoping it will sell soon so we can get this show on the road! 

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