Self Directed 401k Real Estate Investment and Your Retirement Funds

Many retirement plan holders don’t know that there is more beyond the traditional 401k

self directed 401k real estate
self directed 401k real estate

Not a lot of people know that their retirement savings can be invested in other business entities. The general belief among plan holders was that their retirement plan money should be and has to be invested only in stocks and mutual funds. That is what the traditional 401k dictates, but the Solo 401k is completely different. Under the Solo 401k, there are two types of plans—brokerage based and self-directed plan. The latter can apply for self directed 401k real estate investment, but the brokerage based plan do not have the same ability because funds can only be invested in the stock market.

Real Estate investment under ERISA of 1974 could come in different forms, such as investing in commercial properties, apartments, single family rental property, townhouses, condominiums, and even buying real estate in IRA. Mortgage notes, mobile homes, and tax deeds and tax liens are also permissible. The only exceptions are the transactions involving a disqualified person. The IRS has issued strict guidelines covering disqualified transactions.

Most people have little or no knowledge at all that there is a self directed 401k real estate investment option that they can practice with their retirement savings

Knowing that there are diverse options in self directed 401k real estate investment simply means that your retirement money has the potential to grow further. In addition to that, you also have the choice to make your real estate IRA investment tax deferred. Further, the tax-deferred nature of a Solo 401k allows you to contribute pre-tax dollars to your account, which means you’re simply deferring taxes to a later date.  When you choose the tax-deferred option, the entire income generated by the self directed 401k real estate investment is tax-deferred. In other words, all profits generated from any of your real estate transactions on the retirement plan are free of tax until withdrawn or during qualified distribution.