Using Your 401 (k) for Real Estate Retirement Options
Brad Hess
Using Your 401 (k) for Real Estate Retirement Options
Most people don't think of their IRAs as available cash. Since the main purpose of a retirement plan is to save for your retirement, it is often overlooked when it comes to withdrawing money from your plan. With our economy in a rut and employers reducing or even discontinuing contributions into their employee’s retirement plans, you have to get creative and be sure that you will be financially secure when it’s time to retire. Using your 401 (k) for real estate retirement options is a definite possibility when done correctly and the rules and regulations are followed.
What They Don't Tell You
What many people don’t know is there is an IRA provision that allows you to withdraw any amount you choose for any purpose. This can be done once every 12 months, but you must replace the money within 60 days. Most people who withdraw money are doing it because they obviously need it, and 60 days is not a lot of time to repay money. While this may not be a viable option for you with your current plan, you could have other options if you had a different type of IRA. The truth is, most people never examine their retirement plan. If their employer contributes, they just look at the statements and see what the amount is and file it away. These funds are just sitting there, and sometimes not growing or benefiting you the way that they could be.
Choosing the Right Plan
There is nothing written that says you cannot change your IRA. With the help of an accountant, financial adviser, or your plan administrator, you can transfer your IRA to an Individual 401 (k) plan where personal loans are allowed. This will allow you a number of different options.
1. You may borrow from your plan for any purpose.
2. You may borrow up to 50 percent of plan assets.
3. You have five years to pay back the money.
4. The loan payments must include interest.
5. Payments must be made every quarter.
One of the greatest benefits of borrowing from your 401 (k) is if you use the loan to help purchase your primary residence and it is a 30 year mortgage, the interest you are paying on your plan will be tax deductible. This provision allows you to use your retirement money tax free, to create cash flow now.
For the real estate investor, you can use this provision for yourself, or you can pass it on to potential buyers who may lack the funds for a down payment.
When times get tough, you have to think wiser to protect and secure your investments and real estate investing is a great opportunity. Sometimes in the world of real estate it's not who you know, but what you know. Let your money benefit you today.