Since real estate investing is the most popular investment option utilized by Self-Directed IRAs, some of the questions our experts get asked the most are "can I use my 401k to buy real estate" or "can I use my 401k to buy land?" And most investors would like to do this through a rollover so to not get hit a with a withdrawal penalty.
The answer depends on your 401k set up and if you are a current employee of the company.
If you have a 401k with your current employer:
- If you have a 401k through your current employer, you need to contact either your HR representative or your plan account manager to see whether they allow for rollovers while you are still an active participant in the plan.
- If they do allow for rollovers, you can open a Self-Directed IRA, rollover your funds into your new IRA, and invest in real estate without getting hit with a tax penalty.
- If they do not allow for you to rollover your funds while you're still an active participant, this unfortunately greatly limits your options. If you are still determined to use your 401k funds for a real estate investment, you will either have to withdrawal the funds early and get hit with a penalty, or take a loan which you have to pay back to your 401k. These options vary from plan to plan, and you will need to contact your HR representative or plan account manager to see what exactly your options are.
If you have a 401k with a past employer:
- If you have a 401k with a past employer that you have not rolled over into a new account yet, you can rollover the funds into a Self-Directed IRA and invest in real estate.
- If you have a 401k from a past employer and have rolled those funds into a 401k plan with a new employer, you more than likely should be able to roll those funds back out into a Self-Directed IRA. Some plans might differ, but most have a policy that if money was rolled in, it can be rolled back out. Again, you will have to contact your HR representative or plan account manager for your 401k policies.
- Of course, if you have already rolled over old 401k funds into an IRA (for example, into an account with Fidelity, Charles Schwab, or TD Ameritade), you can rollover those IRA funds into a Self-Directed IRA and invest in real estate.