Rolling over a spouse's 403(b) into a self directed IRA

[Account Closed]

My spouse has about $30,000 in a 403(b) from a school system that is no longer an employer. He is almost 50 years old. We would like to use the money for investing in property. My question is whether it would be better to pay the 20% penalty on this modest savings and keep the cash or roll it into a self directed IRA? My understanding is that the rollover amount would also be taxed if we went with a Roth IRA but the Traditional IRA has tax and other disadvantages of its own such as the minimum disbursement requirements.

Any insight about this situation would be appreciated!

[Mark Nolan]

@Account Closed

If your spouse is looking to invest in real estate where the property will be used for personal use and he has not other funds to accomplish such, a distribution may be in order since it is prohibited to use property owned by one's IRA for personal use.

Another option may be to take a loan form the 403(b) of $15,000 and those proceeds can be used for any purpose. 

To learn about he 403(b) distribution and loan rules, see the following.

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-403b-tax-sheltered-annuity-plans

Also, you are correct that Roth IRAs are not subject to RMDs based on current rules (as of 2017) but the IRS is looking to change this rule.