Withdraw IRA/401k or use Self-directed IRA to purchase a rental property

[Florencio Nayve]

Hello everyone,

My wife is turning 59 1/2 yrs old soon. We're planning to buy a rental property using her IRA and old 401k and we're wondering what's the best route to take. We're just old and confused. Is it better to withdraw her IRA/401K (and pay taxes) OR to convert the IRA to a self-directed IRA (SDIRA) to purchase a rental property. What would you do if you were in our shoes? Thank you so much for the help!

[Jeff Nash]

I rarely would advise to take a distribution from the retirement accounts and have less to reinvest because of the tax burden.  It would be similar to not doing a 1031 exchange when you knew you had the ability and intent to reinvest all of the net proceeds in a replacement property.