TSP to ... ?

[Christina Phillips]

Hello family! I am out of the Army now and would like to transfer my TSP (Thrift Savings Plan) in to something I can use for real estate investing. New to this. I have heard of the SD IRA, and now am hearing about SD IRA LLC and a SOLO 401K LLC. Would love some feedback on this. Thank you in advance!

[Brian Eastman]

@Christina Phillips 

The type of plan that is best for you will depend on your situation and investment goals. If you plan to actively invest in real estate, that generally is more time-sensitive and transaction intensive - and therefore not a good fit for a self directed IRA held by a trust company. They do all the processing.

An IRA LLC or Solo 401(k) will provide you with checkbook control - meaning you will operate out of a bank account of your choosing and have the ability to execute plan transactions without going through the 3rd party custodian. An IRA is broadly applicable and could accept a rollover from a TSP. The Solo 401(k) is limited to those who are self-employed and have no full time employees other than their spouse. If you have a self employment activity and therefore qualify for the Solo 401(k), it offers several advantages over the IRA in terms of higher contribution limits, and the elimination of a tax that can apply to an IRA when using leverage such as a mortgage (UDFI).

Another advantage of the checkbook plans is that - if you work with a quality provider - you gain access to consulting not provided by IRA custodians. Custodians are prohibited by rule from providing tax or legal advice. They are purely processors and recordkeepers. An advisory firm or attorney providing a checkbook plan can provide guidance. Not all providers do this well - many are just document providers. Look for a firm that has experience with real estate investing as well as the tax & legal background to help you understand how to operate your plan in a manner that is compliant with the tax rules.

Best of luck getting started!