Using my 401k for REI

[Nicholas Grandstaff]

I'm a complete newbie to REI. This is actually my first post here on Bigger Pockets. I dabbled with the idea of REI earlier in life (I'm currently 39), however, I received mediocre advice and I just wasn't hungry enough at the time to go after it on my own. Now I've arrived at a place where my goals are clear and it's time to reach those goals through REI. I have great people around me and have been consuming the great content on Bigger Pockets. Good people and good information has led me to a spot where I'm anxiously close to embarking on my first deal. 

My question concerning my 401k is this: I've recently pulled 25K out of my 401k to invest in buy and hold RE with no early withdrawal penalties. I have the opportunity to pull another 25K with no early withdrawal penalties. Do you think pulling another 25K to start REI is a wise or unwise move? 

I’m only paying federal and state income tax on these withdraws and I’m not required to pay it back. These are all conditions that have been created due to the Coronavirus pandemic. There’s already been two opportunities for me to pull the money, I only took advantage of one. I just received a letter in the mail that I have another opportunity, between now and Dec 15 to make another withdraw. How far should I take this? Appreciate your thoughts.

[Basit Siddiqi]

@Nicholas Grandstaff

The best time to invest in real estate/yourself was 20 years ago.
The second best time to invest in real estate/yourself is now.

I am happy to hear that you are making the steps forward to invest in yourself/real estate.

It is tough to say taking a retirement distribution is a smart/wise move.
It depends on what returns you were achieving in the retirement accounts
What marginal tax rate you are in right now
What return you will make on those distributions?
What marginal tax rate you would be in the future year(maybe it would have been better to take it out in a later year) even with the 10% penalty)

With that said - I personally took out money from my 401K a couple years ago to invest in real estate and I have no regrets.

You should also determine if you have alternatives - Are you able to loan against the 401K? Loans against a 401K are not subject to tax.