401k and Roth IRA to buy rentals

[Brian Henderson]

Hey everyone, I'm trying to see if anyone could help me figure out if I'm able to use my 401k and Roth IRA to buy rental properties. I've tried to google these topics but didn't get much information. I'm 24 and have about 12k in my 401k and about 20k in my Roth IRA. I plan to grow a real estate portfolio in the future to the point where I can support myself comfortably throughout my entire life and leave my day job. With this being said, I don't see myself keeping a 401k because I don't plan on being employed by a company until retirement age. I also don't receive a match on my contributions so I'd like to put them to better use between now and age 60. Does anyone know if I can take out my 401k funds even though I'm still working for this company? I read some stuff online saying I'd have to leave the company to cash it out? Is this true? I'd also like to know if it's possible to use a portion (not all) of my Roth IRA to buy rental properties because I know it's possible to use a Roth IRA for a primary residence. Thank you in advance for any help!

[Derrick Dill]

Hey Brian,

You can take 401k LOAN out and use for whatever you want. Withdrawal, you'll be taxed and penalized unless you have a "hardship". Currently under CARES act you can withdraw from your 401k with no taxes/penalties if you state you've been affected by covid. You'll still be taxed at your income rate.

ROTH IRA you can always take out your contributions at any time without tax or penalties. However, you'll be taxed/penalized for withdrawals of any EARNINGS your contributions made. (ex. your 10k investment made 1k, you can withdraw 10k penalty free, 1k will be taxed/penalized.)

Disclaimer: I'm not a tax person, CPA, or financial advisor. Just someone who has done both these things before and went through the process.