Solo 401/SD IRA, vs Cash Out, vs Whole Life Insurance

[Nathan Herber]

Hi Bigger Pockets Community! Merry Christmas and Happy New Year to you and your family.

So, I am going down the rabbit hole of researching moving my 401k and my wife's 403b from a former employer to a Solo 401k and a personal Roth IRA to a Self Directed Roth IRA. My question why did you decide to either cash out your retirement investments (and pay the taxes) or, moved them to a solo 401k and/or SD Roth IRA? I have read most of the regulations such as, UBIT tax, Solo/SDIRA can only be applied to non-recourse loans, solo 401k is more flexible than the Roth IRA, and it's better to set up an LLC for the Solo 401k to create a tax ID number for plan contributions etc.

I have to make a decision to move my retirement funds with my former employer's investment institution by March. My goal is to position my retirement funds so they are ready to deploy toward a deal. My three strategies are:

1. 1. Cash out, pay the UBIT tax and report the additional income that year, and if a deal is made next year, implement a cost segregation on the multifamily property to help reduce the taxable income.
2. 2. Move the funds to a Solo 401k / Roth IRA. I'm more limited to certain deals as a JV, but I can move the funds now with no penalty, taking advantage of the stock market/investment fund's all-time-high, and cash out later (or partially) if a recourse loan deal becomes available.
3. 3. Whole Life: With option #2, I must pay myself back over “x” years. While I’m still getting my head around this concept, the 3rd option is to cash out my retirement and place it into a Whole Life Insurance vehicle (infinite banking concept) to take loans against it for around 5% for real estate investments while the policy accuses/compounds over time, ie. 5 years (super simplistic for the purposes here).

I'm in my late 30's if that plays a factor into your answer.  I'm interested to hear how you came to your decisions and lessons learned.  

Thank you!

Nathan