401k

[Tim Esteban]

Hey everyone! Does anyone know if you can use 401k funds to purchase investment properties and do you recommend it?

[Dmitriy Fomichenko]

@Sheila F.

when you use self-directed 401k or IRA, you are not 'touching' your retirement moneys. What you are doing is just like in conventional retirement account you directing your custodian to buy certain stocks or mutual funds, you are directing your retirement dollars into some sort of 'non-traditional' investment. You personally are not touching those funds, the IRA or 401k hold the title to the investment, all of the income from the investments belongs and goes back to your retirement account, not you personally.

The bottom line is that you are in control of your retirement account, but you can't benefit personally from any investments that you make with your account. 

An example would be if you decide to buy a vacation rental in your IRA. You personally and any other 'disqualified person' could not benefit from it in any way (staying in that property for any period of time or using it otherwise in any way), nor can a disqualified person provide any services or do any work on the property, even if it is as simple as changing a light bulb.

Hope this helps and if you need any further clarification please ask.