Creative Real Estate Financing
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated 9 months ago, 03/18/2024
Can i take out all of the money out of a 401k account ?
Still working on finding my first deal but luckily have found my market ! Now i have been tasked with helping my mom invest the money in her 401k account, I was wondering if there was a way to be able to take out 100% of the accounts balance to buy property with it . I'm not too familiar with this form of financing would love some advice on how to capitalize on it !!
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
- Chris Seveney
@Christian Rodriguez
Some plans allow for it if you’re under 59 1/2. Mine does not. Check with your company’s plan. However, I’ve take five 401k loans up to 50k to buy houses. Maybe that’s an option too?
Quote from @Chris Seveney:
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
My mom is 53 years old and she wants to invest the money through real estate instead of it sitting in a 401k account not making any money on it, her retirement is very well assured or else she wouldn't be taking the risk she is by throwing it all into real estate !!
Quote from @John Morgan:
@Christian Rodriguez
Some plans allow for it if you’re under 59 1/2. Mine does not. Check with your company’s plan. However, I’ve take five 401k loans up to 50k to buy houses. Maybe that’s an option too?
i would have to check with her company but i don't think so. Yes that can be an option but at the moment right now i have a deal in the works where i would need more then 50K to be able to make the numbers work
Quote from @Christian Rodriguez:
Quote from @John Morgan:
@Christian Rodriguez
Some plans allow for it if you’re under 59 1/2. Mine does not. Check with your company’s plan. However, I’ve take five 401k loans up to 50k to buy houses. Maybe that’s an option too?
i would have to check with her company but i don't think so. Yes that can be an option but at the moment right now i have a deal in the works where i would need more then 50K to be able to make the numbers work
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
My mom is 53 years old and she wants to invest the money through real estate instead of it sitting in a 401k account not making any money on it, her retirement is very well assured or else she wouldn't be taking the risk she is by throwing it all into real estate !!
- Chris Seveney
It depends on who services the 401K plan. My employer uses Fidelity for my 401K. I have inquired and I am able to take a loan or withdrawal with 10% + taxes even though I am currently still employed. I have fully liquidated funds from my 401K from a previous employer to purchase my rental. Now I keep my 401K with my current employer as reserve funds when purchasing new properties.
@Chris Seveney I was about to ask the same question. Almost impossible to not have made money the past couple years. IMO, someone who hasn’t made anything in the markets recently should certainly not be jumping into real estate with limited knowledge.
Quote from @Mark S.:
@Chris Seveney I was about to ask the same question. Almost impossible to not have made money the past couple years. IMO, someone who hasn’t made anything in the markets recently should certainly not be jumping into real estate with limited knowledge.
It depends on the administrator overseeing his mother's 401K account. I can tell you that I lost 20% in my 401K since 2020 unfortunately. I decided to take control of it instead of leaving it in the hands of the account administrator.
#3 Buying & Selling Real Estate Contributor
- Investor
- Las Vegas, NV
So e plan is to lose 30-50% of the money in taxes and penalties the day you take the money out? Then crush it and earn 10% so that in 5-6 years she’s back to where she is today if everything goes perfectly? Sounds like a horrible plan.
I HATE annuities. But in today’s interest environment she would be better off buying an annuity. Heck. Put it in a CD and she can earn 5-6%. Using funds in a retirement account for real estate is a bad idea. Taking it out paying the taxes and fees and then investing it might be even worse.
Ps. FSKAX (fidelity total market) FXAIX (fidelity s&p 500) and ONEQ (nasdaq eft) a few of the most basic simple investments have returned 8-12% annually over the last 3 years. You literally had to go out of your way to break even, much less lose money.
@Nixon Corpuz 401k plans are by their nature participant directed. The plan sponsor selects a firm to provide overall administration, and also selects numerous investment options for participants to choose from. ‘Plan administrators’ do not direct the investment selection on behalf of the participant. 
Quote from @Mark S.:
@Nixon Corpuz 401k plans are by their nature participant directed. The plan sponsor selects a firm to provide overall administration, and also selects numerous investment options for participants to choose from. ‘Plan administrators’ do not direct the investment selection on behalf of the participant. 
Yes, you are correct. Essentially it was my failure because they were my elections and I hadn't checked on the performance in over 3 years. I missed opportunities to rebalance my portfolio and adjust asset allocation. I learned the hard way unfortunately.
@Nixon Corpuz Well, we’ve all done something like that at one time or another!
Your mom has research to do. Check rules on her 401k with her employer ( vested, not vested) and with her accountant.
If she takes the money out and puts it in her personal checking account that will be considered ordinary income and she will owe, state and federal tax, plus penalites and maybe SSI. So, she is going to lose a massive chunk of money. Like half. So that is not really a plan.
It is possible that she could create a self directed 401k and that could own real estate. But, she could not do any transactions with family members so that doesn't help you out. Also, much harder to get financing and she still can't take out any money before she is of retirement age. Also remember that she isn't paying income tax on these accounts so there are no deductions.
She might be able to take a loan against a portion of her 401k and loan some of it to you but you need to research that. Also, not good advice for any one to ever borrow against their retirement. If you both had self directed 401k / IRA accounts you could possibly invest together but you would need to figure out how she gets her money at retirement age when you can't get your money until retirement age.
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
My mom is 53 years old and she wants to invest the money through real estate instead of it sitting in a 401k account not making any money on it, her retirement is very well assured or else she wouldn't be taking the risk she is by throwing it all into real estate !!
To be fair, the stock market was up about 20% last year. So, she should research her options with investing in the 401k.
Quote from @Christian Rodriguez:
Still working on finding my first deal but luckily have found my market ! Now i have been tasked with helping my mom invest the money in her 401k account, I was wondering if there was a way to be able to take out 100% of the accounts balance to buy property with it . I'm not too familiar with this form of financing would love some advice on how to capitalize on it !!
Check out something called a Roll Over Business Startup (ROBS) account. You roll your 401k into an investment account that purchases stock in a corporation. You create the corporation and use it as a property management company, and the ROBS account essentially funds it by purchasing the stocks. There are a few companies which manage these types of investment accounts and can help navigate the setup process.
#1 Goals, Business Plans & Entities Contributor
- Developer
- 3,520
- Votes |
- 3,563
- Posts
#1 Goals, Business Plans & Entities Contributor
- Developer
I would wait till after you have your first deal before helping your mother move into real estate. You need to be in real estate doing deals for about 5 years before I would feel comfortable advising someone.
Reading between the lines she could lose all her 401k and still be set for retirement? If so, she has enough assets outside of her 401k to start Real Estate investing.
I have taken all of my 401k out and paid the roughly 40% tax and penalty. But I already had the experience and could run the numbers. Plus we do development and the returns far outpace the loss of 401k value, but that is not the norm. Plus our retirement is taken care of outside of the 401k.
Get experience first.
Quote from @Christian Rodriguez:
Still working on finding my first deal but luckily have found my market ! Now i have been tasked with helping my mom invest the money in her 401k account, I was wondering if there was a way to be able to take out 100% of the accounts balance to buy property with it . I'm not too familiar with this form of financing would love some advice on how to capitalize on it !!
Most companies only allow you to take out 50% only.
Unless you’re switching jobs or it’s a hardship than you can take out all your money but I will pay a huge tax I believe a total of like 30%..
But if you use the 401K into a primary home, it gets taxed way different which is a good thing if your mom wanted a property and investment.
You can also borrow a loan agains the 401K and would just have to get the money taken out her checks until the loan is repaid back. Typically it’s like 10% on the money. So if she took out like $25,000. Weekly would be like $98 a week taken out. Which isn’t bad for a asset investment and she doesn’t have to pay taxes on that part of the strategy
Quote from @Chris Seveney:
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
My mom is 53 years old and she wants to invest the money through real estate instead of it sitting in a 401k account not making any money on it, her retirement is very well assured or else she wouldn't be taking the risk she is by throwing it all into real estate !!
No i apologize i worded that wrong, i meant she wont be making any money on the account because she is leaving that company this month and is asking me if i could find a property that cash flows so we can use the money she has in the 401k to buy it instead of putting it into a CD. thank god for the bigger pockets community for helping me realize i have way more research to do!!!
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
My mom is 53 years old and she wants to invest the money through real estate instead of it sitting in a 401k account not making any money on it, her retirement is very well assured or else she wouldn't be taking the risk she is by throwing it all into real estate !!
No i apologize i worded that wrong, i meant she wont be making any money on the account because she is leaving that company this month and is asking me if i could find a property that cash flows so we can use the money she has in the 401k to buy it instead of putting it into a CD. thank god for the bigger pockets community for helping me realize i have way more research to do!!!
yes she should move it to a self directed IRA and then invest it in real estate, she is not in a time crunch to invest it once it is in the self directed ira. she can take her time and no need to rush
- Chris Seveney
Quote from @Laura Powell:
Quote from @Christian Rodriguez:
Still working on finding my first deal but luckily have found my market ! Now i have been tasked with helping my mom invest the money in her 401k account, I was wondering if there was a way to be able to take out 100% of the accounts balance to buy property with it . I'm not too familiar with this form of financing would love some advice on how to capitalize on it !!
Check out something called a Roll Over Business Startup (ROBS) account. You roll your 401k into an investment account that purchases stock in a corporation. You create the corporation and use it as a property management company, and the ROBS account essentially funds it by purchasing the stocks. There are a few companies which manage these types of investment accounts and can help navigate the setup process.
If 401k funds are rolled over, is that a taxable event? Do you have to roll the funds from the 401k to a self directed 401k first ?
Who is on title to the property? The corporation? What happens to any profits that the corporation makes? Do those go to the corporation as income? Or do they flow back to the 401k ? It sounds like it may be possible to use 401k funds , in a round about way, to end up with current income. This is exactly what the IRS does not want. For any one considering this, please talk to your accountant and lawyer. You are going to have to nail every step of every transaction. I'm not sure how this would get around the prohibited transactions of a Roth.
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
Quote from @Christian Rodriguez:
Quote from @Chris Seveney:
@Christian Rodriguez
How old is your mother?
More importantly / Why would you ever take someone’s entire retirement amount and invest it in one property?
My mom is 53 years old and she wants to invest the money through real estate instead of it sitting in a 401k account not making any money on it, her retirement is very well assured or else she wouldn't be taking the risk she is by throwing it all into real estate !!
No i apologize i worded that wrong, i meant she wont be making any money on the account because she is leaving that company this month and is asking me if i could find a property that cash flows so we can use the money she has in the 401k to buy it instead of putting it into a CD. thank god for the bigger pockets community for helping me realize i have way more research to do!!!
When you own real estate in a self directed account, like IRA or 401k, all of the tax laws are different. No deductions against your personal income tax, no write offs, no depreciation. Nothing. Your retirement account does not pay income tax so there are no deductions to your income tax. Keep that in mind, when you are vetting your deals.
Quote from @Christie Gahan:
Quote from @Laura Powell:
Quote from @Christian Rodriguez:
Still working on finding my first deal but luckily have found my market ! Now i have been tasked with helping my mom invest the money in her 401k account, I was wondering if there was a way to be able to take out 100% of the accounts balance to buy property with it . I'm not too familiar with this form of financing would love some advice on how to capitalize on it !!
Check out something called a Roll Over Business Startup (ROBS) account. You roll your 401k into an investment account that purchases stock in a corporation. You create the corporation and use it as a property management company, and the ROBS account essentially funds it by purchasing the stocks. There are a few companies which manage these types of investment accounts and can help navigate the setup process.
If 401k funds are rolled over, is that a taxable event? Do you have to roll the funds from the 401k to a self directed 401k first ?
Who is on title to the property? The corporation? What happens to any profits that the corporation makes? Do those go to the corporation as income? Or do they flow back to the 401k ? It sounds like it may be possible to use 401k funds , in a round about way, to end up with current income. This is exactly what the IRS does not want. For any one considering this, please talk to your accountant and lawyer. You are going to have to nail every step of every transaction. I'm not sure how this would get around the prohibited transactions of a Roth.
All very valid questions - and all answered by one of the companies that manage these types of accounts (whose CPAs and attorneys will advise you). You can see more info on this type of account here: https://catchfirefunding.com/want-to-use-retirement-money-fo...
It's definitely complex, and there are absolutely restrictions, but also absolutely ways to make it work. Each situation is unique so I agree - alway ask for professional advice!