What should I do with my 401k?

Question

I just left my long time position at Home Depot and accumulated a pretty big sum of money. Without transferring my money to my new job and suffering penalty fees, what would be the smartest decision to make with my money?

Carl Fischer · Answer

Hello @Nicholas Blaylock. To reiterate the points made by @Steve Mcmahel, depending on your employer plan, you may be able to roll either a portion or all of your 401(k) into a self-directed IRA. There are many custodians and administrators to you can choose from to facilitate your investments; BiggerPockets provides a list for you to reference here. Things to consider when choosing a SDIRA custodian are customer service, knowledge, experience, and processing speeds. Many investors have found success by self-directing their IRAs or 401(k)s to invest in alternative assets, and one of the most popular assets is real estate. You can own residential, commercial, raw or improved land in your IRA or 401(k).  Once you find the custodian that is right for you, you can make investments in alternative assets to grow your future retirement savings through ways that utilize your personal knowledge and expertise.

Be sure to check with your former employer to see if you are eligible to rollover your 401(k) to a self-directed IRA. I would be happy to connect and answer any questions you have.

Steve Mcmahel · Answer

I rolled mine into a self directed IRA (its a traditional one -not Roth IRA, so eventually I would have to pay taxes on disbursements) but I can use the money in the new SD IRA to purchase property- although its difficult to use it for a down payment unless you get a bank to provide a non-recourse loan, which is not standard.  The point being that instead of keeping the money in the stock market roller coaster I can invest in real estate for long term growth.  I am buying land since I don't have enough $ to purchase a SFH outright. Hopefully the land will grow in value and I can sell it down the road and pay little taxes on it until I do sell it.

Gohar S. · Answer

@Nicholas Blaylock

The two times I've switched jobs in my career this far, I am always transferred the funds to am IRA.

Job 1:. I had my personal Roth IRA funds with Fidelity Investments.  At this time, being 26'ish, I did research and moved my Fidelity IRA funds and my company 401k funds to Vanguard mainly bc of fee's.

I kept my personal Roth IRA and Rollover IRA into separate accounts. But I did combine my Roth 401k over to Roth IRA.

Job 2:. Transferred all to Vanguard to rollover accounts, mix of traditional and Roth.

Be sure you do this transfer bank to bank.....and do not take holdn funds as that may get complicated.  This is a great time to convert to Roth bc stocks are lower today .

Steve Mcmahel · Answer

@Tze Lee yes there are custodians to assist and there are a lot of rules so its best to contact Carl Fischer above or Equity trust.

Tze Lee · Answer

Hi Folks, I'm planning to roll over and buy a rental myself.

How does expense management typically work?

Like paying property tax yearly, repairs, or even upgrades(say forced appreciation of 3 to 4 bedrooms).

Is there a custodian account I control?

Carl Fischer · Answer

@Nicholas Blaylock

Invest it in something you understand and feel comfortable with. Don’t experiment with it. If it’s traditional assets like stocks and bonds pick a brokerage house. If non traditional assets then look for a self directed company. Risk tracks with lack of knowledge and inexperience. Good luck!

Juan Deshon · Answer

You can look into making private investments through a self-directed IRA. If you have a good sum, consider purchasing property or passive investments like Notes in a Traditional IRA (After rolling over the 401k). You may even want to look into converting some funds to a Roth IRA and gain tax free benefits! Some food for thought without giving a book of information. Lot of education out there on self-directed IRAs.

George Blower · Answer

@Nicholas Blaylock

@Matthew Irish-Jones

1) You can't take a loan from your former employer plan that you had through Home Depot

2)

• If you are self-employed (i.e. active self-employment earned income separate from your w-2 income) with no full-time w-2 employees, you can set up a Solo 401k and then rollover your 401k funds once you leave your current job [NOTE: You generally can't rollover funds that you saved to your current employer plan until you quit.].
• You could then take a loan of up to 50% of the balance not to exceed $50,000. Please be sure to select a Solo 401k plan provider which allows you to take a loan and will prepare the required 401k loan documents.
• The repayment terms are equal monthly/quarterly payments (as you prefer) of principal and interest (e.g. prime + 1%) spread over a 5 year term (or longer if you will use the loan to purchase your primary residence).
• There are no prepayment penalties and no restrictions on what you can do with the proceeds of the 401k loan.
• Please note that you are obligated to pay back their 401k (regardless of the performance of your real estate investment).
• As an alternative to taking the loan, you could even purchase the investment property directly using funds in your Solo 401k (assuming you select a Solo 401k plan provider which allows you to invest in real estate). If you don't have enough Solo 401k funds to purchase the property as an all-cash deal, you can combine your Solo 401k funds with non-recourse debt to purchase the investment property. Learn more about non-recourse lenders here: https://www.biggerpockets.com/member-blogs/9552/70408-ira-and-solo-401k-non-recourse-lenders

Tze Lee · Answer

Thank you @Steve Mcmahel.  Doing a bit more reading up then a reach out.

Steve Mcmahel · Answer

check out https://try.trustetc.com/equit...

What should I do with my 401k?

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