Using 401K for investing

[Jack Middleton]

I am just getting started and I know that there is information on this - have read several things about utilizing a 401K for investing in RE. I am still unsure of how I can use my 401K. I am still employed, but am past the age that would restrict me from withdrawing it. My employer mentioned that I can move that money, but I am unsure of what to do with it.... borrow my savings for RE? Try moving it to a self directed IRA?

I'm unsure of ramifications to using that money, and how to do it with the least tax.  Let me know if there are other posts that would clear this up for me.

Thanks for any help I can get to help clear this up in my mind.

[George P.]

Originally posted by @Thomas Rutkowski:

Originally posted by @George P.:

I called the company that keeps our 401k from work and asked for a 50k check.  at 3.25 percent, payable to me! 

then I got another 18k and got me a house that cashflows nicely.  one of the best decisions I have made. 

 George - Your post really doesn't tell us whether or not this was a good decision for you. How much was your money earning when it was in the 401k? Because you borrowed that $50K, it is no longer there earning a return. Because you have to pay 3.25% to borrow your own money, are you still making more than you would have?

The life insurance leverage strategies I advocate are so much more powerful than this approach. When you fund a high cash value policy, you do not borrow "from" the cash value (like you did), you borrow "against" the cash value. The insurance company is giving you a loan of their money with yours as the collateral. This strategy allows your money to literally work in two places at the same time.

I've known quite a few people that have been burned doing what you did. If that loan isn't paid back, the 10% penalty for early withdrawal applies if you are under 59.5 years old... plus the taxes.

 i understand what you are saying and unless i keep the SAME investments in the 401k that the amount held, i'd never know how much i "lost" or "gained" by taking the money out. Maybe there is a way, but i am not that curious to know.

I am paying it monthly, over 5 yrs, from my paycheck at 3.25%. Maybe it's not the correct way, maybe not the best method. i know i'd never have gotten that house unless i took money from the 401, that's what's important to me.