Self-Directed 401k -- how much before its worthwhile?

[Brandon Lorenz]

Hi All!

Have spent some time reading the posts about self-directed 401Ks -- I had no idea about this structure until I joined BP!

What I haven't seen, but am curious about, is how much does one need for this to be a really worthwhile tool? For example, if one had a couple orphan 401ks that add up to around $20,000 would this be worth turning into a self-directed 401k and perhaps used as a hard money investor for your LLC's rehabs?

Thanks in advance for any thought's y'all might have

[Andrew Postell]

@Brandon Lorenz my first suggestion is that if you have 401(k)'s managed by employers that you are no longer with then please roll those over to your current employer or consider rolling over to another plan.  Your fees are probably through the roof on those if you aren't employed under those plans anymore.  

The other suggestion I would have is what do you want to do with your profits?  Meaning are you ok not touching a dime of profits until you are 65?  If that's the case then you can use these funds to purchase a property that will need to say in the retirement fund.  If you are trying to use profits for other means then keeping the house in the 401(k) might not be the right choice for you.

You can certainly cash out these plans now, take the tax hit and invest in real estate.  Or you can keep the money in the retirement plan, buy homes in the plan, and invest in real estate.  Just decide on your goal and that will guide you on what to do.

Hope this helps!