Roth IRA Contributions: Transfer from Self Directed IRA?

[Tom Squire]

Hello BP!

Fairly new to real estate investing, just bought a condo this past year with my girlfriend (and not looking forward to doing my taxes) and am currently in the "save money for additional investment while I learn as much as I can" phase.

My question is this: I have 3 investment accounts with Fidelity: a standard investment account, a self directed IRA (from an old employer), a Roth IRA (all with roughly equal amounts). I haven't contributed anything to my Roth IRA or my self directed IRA for the 2015 tax year, aside from my employer IRA which I cannot access right now. I've heard its good to max out the Roth IRA contributions while I'm still young (26).

I have enough to max out the contribution for the year if i were to transfer from my regular IRA. I know I'll have to pay the income tax on it now, but is that a wise investment? I also have enough in savings to max out my roth IRA but that would be pretty limiting in terms of liquid capital.

Lastly, if I do make the contribution to my Fidelity Roth IRA, can I use that to invest in Real Estate?

Should I make a small contribution of cash to my Roth IRA before the end of the tax year? Should I continue to save my cash to eventually invest in additional property?

Thanks in advance for the advice!

[Mark Nolan]

@Tom Squire

@Tom Squire

If you want to invest your IRA funds in real estate, you will need to find a different IRA custodian than Fidelity. A company called IRA Services Trust Company in the San Francisco area offers self-directed IRAs.

The following information will help you to understand the differences between a Traditional IRA and a Roth IRA.

• Roth IRAs grow tax free. 
• Traditional IRAs grow tax deferred
• Contributions to Roth IRAs are made with after tax funds. 
• Contributions to Traditional IRAs are made with pretax funds. 
• Roth IRA contributions may be withdrawn at any time tax and penalty free.
• Traditional IRA distributions are subject to taxes and generally a 10% early distribution penalty if made prior to reaching age 59 1/2.
• Roth IRAs are not subject to required minimum distributions (RMDs) whereas Traditional IRAs are subject to RMDs.