Exiting Coroporate America and Rolling over 401k to REI

[Lauryn Meadows]

Hello BP! I have a family member looking wanting to exit his corporate job and start investing in RE. He has $1m+ in his 401k. What are the best tax strategies to mitigate the tax burden and avoid the 10% hit on being under age 55?

[Patrick M Nichols]

My attitude (not as an attorney, but as a citizen) is that tax rates are currently about as low as they will ever be in our lifetimes and likely to go up in the medium to long term. Without getting overly political, the Trump tax cuts (TCJA) failed their ostensible purpose to stimulate the economy and the federal deficit is not sustainable. 

Having said that, I think the conditions are ripe to roll over traditional 401ks into Roth 401ks or Roth IRAs. You would pay tax now, but "cleanse" the money of tax going forward. Of course, there are a large number of complex variables.

A Certified Financial Planner would need to look at the specifics to make sure making such a major move would in fact save you money.

The nice part about an IRA is that you could also do a self-directed IRA allowing you to directly invest those funds into property. Good luck!