Can I Invest in My Own Business With 401K Money?

[Tom Scott]

Hello all,

As part of my Roth 401K plan I am able to use a portion of my account balance as a self directed investment account. I know I am able to invest that money directly in real estate with the caveat that all profits go back into the retirement account as earnings. This is of course good, but then all my profits are tied up in the investment account and I can't access without penalty. Would it be possible to invest this 401K money in my rehabbing company which will then pay a set interest rate to the 401K. I would essentially be my own hard money lender.

So, am I crazy or is this illegal? I'm guessing if there is a legal question it would be due to my proximity to the investment?

Tom

[J Scott]

Originally posted by @Daniel DiGiacomo:

Tom, definitely need to talk to an expert. Google "Self Directed IRA Rollover" and find a reputable company... give them a call and find out what they can do. If they control the IRA and distribution, you are protected from accedintaly doing anything illegal.

Nope. It's not the responsibility of the SDIRA company to advise you of potential ERISA compliance issues.

For example, if you make an SDIRA loan to a disqualified family member, it's very unlikely the SDIRA company will know that's the case (or care). They'll disburse the money as you direct them to (hence the "self directed")...they won't vet your investments for you.