I have about 70k in 401k from my previous employer.What would be the best way to invest that money as of TODAY . Appreciate input from the experienced members here.
What are your goals and real estate experience? For some folks, moving to a SDIRA or QRP and investing in syndications makes sense. For others, notes are great.
There are so many ways to make money in real estate, there isn't one "best" that is the best for everyone.
What are your goals and real estate experience? For some folks, moving to a SDIRA or QRP and investing in syndications makes sense. For others, notes are great.
There are so many ways to make money in real estate, there isn't one "best" that is the best for everyone.
You should roll it to Vanguard IRA. Vanguard has probably the lowest expense funds. You can buy funds that invest in international stocks, growth stocks in the US, value stocks, and much more. You can also invest in syndication using self-directed IRA.
I may take some heat (disagreement) for this post. It is my opinion, take it for what it is worth.
The amount is $70K from a prior employer and you are asking on the BP website. I assume you are a young person (perhaps about 30), you are paid well, but not yet an outrageous amount so your tax rates are not terribly high, and you have an interest in RE.
Given the following: You WIN in an traditional IRA (and all the other similar accounts) if you receive the money someday at a lower tax rate than what you put it in. The tax rates today are the lowest in my lifetime.
Do the MATH to decide what is better for you and realize it changes with the tax rates. Do you forecast higher or lower taxes in the future? Do you prefer CapGain or income rates?
It is true, if you are a near failure (approximately broke when you retire), you can have minimal income in retirement and get your IRA money out for a song. I went to a retirement seminar where they taught folks to hide everything (assuming you didn't have too much) so that you could avoid taxes completely. I had too much already. And I didn't really want to exist like that!
If you plan to succeed (retire with wealth and/or income), the RMD (forced withdrawals from traditional IRA) on that pot trad-IRA will move you to a higher tax bracket. Folks that play in property tend to be successful (more wealthy) and have a stream of "income" that is part CapGain and part taken against depreciation, ie., avoid a lot of taxes.
If your company has a match, put in the needed amount. If you can, put yours in a Roth 401K, their contribution will go to a trad 401K. Roll it out if you change jobs or at 59.5. Depending on your tax rates at that moment, choose to pull some or all out or convert to a Roth IRA. If there is a correction in the market, JUMP to pull or convert!
Do consider: There are protection advantages to 401K. There are advantages to bequeathing Roth IRA. You may have a reason to leave some money in those.
Personally, I used 401K/IRAs (when tax rates were higher) and saved on my own. I did (fairly) well in the market. This gave me funds to become a MF passive investor (There are a lot of ways to make money in RE). It was and still is hugely advantageous to have my money (non-IRA) to invest in MF syndications. YES, SD-IRA can be used. I did 1 deal that way; but it hurts to see the returns go into a bucket, that I will pay income tax rates on when it comes out -- rather than Cap Gain rates (now or delayed).
A lot of your points regarding taxation in an IRA suggest that Roth funds might be a better alternative. Many think that taxes are currently lower now than they will be in the future. With Roth funds in a self-directed IRA or 401k, one would pay taxes at today's low rates and assets would grow tax free.
@Justin Windham -- I think we agree: Roth is a better choice given the current low tax rates; pay tax on the seed, not the crop. If one's income is extremely high or rates go up, re-think the choice.
I see you are an Solo-401K guy. For the IRA folks that do syndications, there is the mysterious UBIT/UDFI taxes (Yes, there is a tax inside the IRA). And when one uses qualified money, you loose the cap-gain tax rate and pay income (in the future).