Should I invest in rental properties with my 401K?

[Kathleen Amundsen]

Hello  I have a 401k worth 250000 and I am retiring from company> Im 55 years old and want to buy some rental properties for my 2 kids to rent from me.. I need the income from the rental properties now and was considering buying the rental properties instead of doing the stock market??  What are some of the tax issues I will run into and do I have to declare the rental income ?  Not sure what to do?

[Dmitriy Fomichenko]

@Kathleen Amundsen

you can rollover your 401k into self-directed IRA and buy rental properties with it. However, you can not rent those properties to your children since they are considered "disqualified persons". Consider becoming a private lender and using your IRA as a bank to lend money to others. You can get nice returns with relatively low risk.

There are no tax consequences for the rollover and all investment gains and income will be sheltered from taxes just like any other retirement account. You will pay taxes at the time of distribution.