Highland, IN · Member since 2012 · 253 posts · 36 votes
I recently left my job where I had a roth 401k (so my contributions were made after tax). Does anyone know if I am able to roll this account over into some kind of self-directed IRA where I can use the funds for real estate investments (I'd be looking to do home flips in this case).
Additionally, since my contributions were made after taxes, could I withdraw this money penalty free and without having to pay any additional taxes? Is that correct, has anyone been able to do this before? Obviously if I withdraw from my growth and/or company contributions, I would have to pay taxes on that (and possibly a 10% early withdrawal penalty), but is there a way to distinguish between the two when taking a withdrawal?
Accountant · Center Conway, NH · Member since 2013 · 19 posts · 2 votes
12y
Since the Roth 401(k) is funded by after-tax dollars, individuals can withdraw their contributions to the account without facing any penalty or taxes. However, withdrawals beyond contribution cannot be made till the employee reaches the age of 59½ and has had the account for 5 years (except under special circumstances). Withdrawals (above contribution) before this age are subject to 10% penalty and income taxes.
Investor · Louisville, KY · Member since 2011 · 331 posts · 278 votes
12y
Brian seems to know what he's talking about. It may be related to that CPA designation after his name :). The only question I have is whether you want the money now or you want it in a retirement account? If you want it in a SDIRA, it should be possible. I like Equity Trust, but there are others out there.
Thanks for confirming that. Sounds like it should be fairly simple to get that money then? As a hypothetical, say you have $25k in a roth 401k, and your contributions total $20k. I would be able to get a check for the $20k amount while leaving the $5k in the roth 401k and have no taxes or penalties in that scenario?
Highland, IN · Member since 2012 · 253 posts · 36 votes
12y
@erik hitzelberger
You make a good point. If you rollover into a SDIRA, then any profit would have the tax advantage of an IRA. Of course you couldn't touch the gains for a while, so it's just a matter of whether or not you want to spend the profits (on non-investment purchases) now or later.
I recently left my job where I had a roth 401k (so my contributions were made after tax). Does anyone know if I am able to roll this account over into some kind of self-directed IRA where I can use the funds for real estate investments (I'd be looking to do home flips in this case).
Additionally, since my contributions were made after taxes, could I withdraw this money penalty free and without having to pay any additional taxes? Is that correct, has anyone been able to do this before? Obviously if I withdraw from my growth and/or company contributions, I would have to pay taxes on that (and possibly a 10% early withdrawal penalty), but is there a way to distinguish between the two when taking a withdrawal?
Brian did mention some good things, although I will mention a few. Most employer's do not allow you to keep the funds in the account after a specified period of time. They require distribution to another account or to the owner.
Yes, you can take only the contributions out. IRS code specifies a specific order that distributions are taken in. First out is contributions. After contributions it goes to earnings. That is a correct scenario that you can take out all but the earnings; however, why would you want to do that?
DO NOT ROLL IT TO AN IRA!!!!!!
This is imperative. The reason is once it is in that Roth IRA you can NEVER roll it out of that account. That means no Roth Solo 401k if you move it to an IRA first. You can move to another Roth 401k. That is permitted.
I highly advise that you roll to another Roth 401k if at all possible.
Rehabber · Denver, CO · Member since 2013 · 43 posts · 9 votes
12y
Hi Kyle. I chose to convert previous employers Roth and Traditional IRA to a SDIRA with checkbook control. These funds I intend to grow for retirement and do not need the money now. The funds have been available in the checking account for a month and a half now. I'm currently looking for either a fix/flip or fix/hold investment. The investment will require leverage as I have less than $25k in the SDIRA, so I'll have to use a hard money lender, private financing or rather scarce non-recourse long term loan to complete the investment.