Moving a Company 401(k) due to Coronavirus Layoff

[Kyle J. Cooper]

So I'm sure I'm not the only one here that is curious about this topic, but here goes nothing! I'll make it short and (relatively)sweet!

Coronavirus hit the world, no one was prepared.

Companies started closing down.

Pay starts to get cut, and then the layoffs happen.

This happened to me recently and I'm curious what to do with this 401(k). The way I see it, I have a few options.

1.) Keep the funds with my past employer continuing to enjoy the unfortunately less than exciting gains from an actively managed fund(not likely I'll take this option)

2.) Rollover this account into an IRA where I can control where that money is invested moving forward

3.) Cash out, take the early withdrawal fee, tax hit, etc etc and go buy more Bitcoin(highly unlikely to choose this option, but I'm sure plenty of people have done this ha ha).

-Is there any way I could access these funds to use toward a down payment for an investment property, without all the negative side-effects of early withdrawal and heavy taxation?

Anyone else in a similar situation now or in recent history? 

Side thought---I've followed the F.I.R.E. community(Financial Independence Retire Early) for some time now, and so I've thought of using that money to fund my Roth IRA and invest in low cost index funds. Even with this option I'd be taking pre-tax funds and moving them to an after tax account(Roth IRA), and not quite sure about the ins and outs of doing that myself.

***Crummy situation but I hope this brings up a topic that others are going through as well so we can All Get Through This Together(that's the phrase of 2020, right?)

[Brian Eastman]

@Kyle J. Cooper

I suggest you explore the concept of a self-directed IRA. Such vehicles would allow you to rollover your funds tax-free into an IRA - but with a broader range of investment choices beyond just managed funds and conventional stocks, etc.

A self-directed IRA can invest in Bitcoin and real estate, as examples.

The key to understand is that this is purely a diversification of your tax-sheltered retirement savings. The IRA owns a property, pays the expenses, and receives the income in a tax-sheltered means. It is not you investing in real estate personally and having access to the IRA money to do so.

An IRA can use mortgage financing to acquire property. Any loan has to be non-recourse, meaning no personal guarantee from you. When an IRA uses debt-financing as leverage, there is a small bit of taxation on the returns the IRA receives as a benefit of the borrowed funds.

There is lots of good information here on BP on this topic.  Happy reading...