Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Tax, SDIRAs & Cost Segregation
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated 6 days ago, 12/27/2024

User Stats

17,832
Posts
6,216
Votes
Dmitriy Fomichenko
Tax & Financial Services
Pro Member
#1 New Member Introductions Contributor
  • Solo 401k Expert
  • Anaheim Hills, CA
6,216
Votes |
17,832
Posts

How to supercharge your Roth IRA or Roth 401k

Dmitriy Fomichenko
Tax & Financial Services
Pro Member
#1 New Member Introductions Contributor
  • Solo 401k Expert
  • Anaheim Hills, CA
Posted

NEVER CONVERT CASH in YOUR IRA or 401K into ROTH!!!

Here is why. If you do so - 100% of the cash converted is taxable. There is a much better alternative!

The alternative is to set up a self-directed IRA, or better, a truly self-directed Solo 401k plan, invest in alternative assets, and then do the conversion. Some assets can be valued significantly lower than their actual worth because of illiquidity and other factors. With some of my clients, I've seen discounts of 30% to 90%.

Here is a real-life example: I invested in a $50K note; it was second TD but with significant equity (over $200K) protecting my investment. It is a very secure investment, and it is almost impossible to lose money on this deal. Over the years, I've done several dozen of these and know how to pick a good one. The borrower defaulted and was a few months behind. I hired an IRA-approved valuation company to value that note at that time. Because of illiquidity and the fact that it was in default and a foreclosure sale was scheduled, it was valued at $21K. Almost 60% discounted!! Immediately, I performed a Roth conversion. So, instead of paying taxes on $50K, I'm paying taxes on only $21K. About a week ago, the borrower came through, paid all past due payments, paid all the costs associated with the foreclosure, and the note is now current.

I learned this strategy from one of my clients. Knowing what I know now, I will never contribute to Roth; I will only make pre-tax contributions, get maximum tax deductions, invest, and then be selective about which asset I want to convert (such as the one above).  That is how you can supercharge your Roth!!

Have you done something similar? I would love to hear your examples!

  • Dmitriy Fomichenko
  • (949) 228-9393
business profile image
Sense Financial Services LLC
4.9 stars
166 Reviews

Loading replies...