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Updated over 6 years ago on . Most recent reply

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Richard Haug
  • Santa Barbara, CA
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Shifting into self directed Roth IRA

Richard Haug
  • Santa Barbara, CA
Posted

Hello

I just thought of a possible way to shift funds out of my 403b retirement fund and wondering if it's valid.

I work for a university and have a 403b. Recently reached the age of 59 1/2 so I can take funds out without being penalized but would have to pay taxes. My question would be would it be possible to shift the funds from my 403b into a self directed Roth IRA to avoid paying the tax. And then use those funds to invest in real estate.

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Dmitriy Fomichenko
#1 New Member Introductions Contributor
  • Solo 401k Expert
  • Anaheim Hills, CA
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Dmitriy Fomichenko
#1 New Member Introductions Contributor
  • Solo 401k Expert
  • Anaheim Hills, CA
Replied

@Richard Haug

You can rollover retirement account only into another like kind retirement account. What I mean specifically is this: contributions to your 403B account were made pre-tax, contributions to Roth IRA are made post-tax. Those are not like-kind accounts. If your goal is to get your money into Roth IRA you can do that but you must follow these steps:

  1. Rollover your 403B account into Traditional IRA
  2. Convert your Traditional IRA into Roth IRA. This will be taxable event, the amount of conversion will be reported to you by the custodian on form 1099R as taxable income for the year in which you made the conversion.
  3. Rollover your Roth IRA into self-directed Roth IRA. Now you will be in the position to invest in real estate as well as any other alternative investments such as trust deeds, precious metals, multi-family syndications, note funds, or use your IRA as a bank and do private lending (this is my favorite way to invest retirement funds because it is completely passive, high returns and lower risk, but you must do your due diligence on the borrower and underlying property). 

Good luck! 

  • Dmitriy Fomichenko
  • (949) 228-9393
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