Pulling $100K out Retirement account for Rental Properties-COVID

[Rodney Buford]

Good morning BP'ers,

I hope this doesn't come across as a dumb question but I am really struggling with this decision.  Due to COVID-19 my W-2 income has taken a 15% decrease for an undetermined amount of time.  My wife was out of work for several months and just now starting to get back to work.  Due to the CARES Act, the 10% penalty is being "Waved" in 2020 assuming you meet the loose requirements that they have.

• Any individual who has experienced “adverse financial consequences” because they’ve been quarantined or furloughed, or because their hours at work were cut.

• Individuals who haven’t been able to work because they’ve had to stay home to take care of their kids.
• Business owners who have had to slash operating hours or shut down due to the outbreak.

Basically the Fed's are printing money at an alarming rate which in turn "devalues" the dollar.  Why would I continue to save in my 401K and why would I not take advantage of this "10% discount" now and pull $100,000 out of my Retirement and invest in good quality rental properties.  I realize I will have to pay tax on that $100,000 but would pay tax on that at some point anyway.

I am no finance expert and honestly just trying to get feeback. I just try to dumb everything down and simplify things.  I am struggling to figure out the pro's and con's of this.  I am in the 50+ crowd so this may make a difference on what I do.  I want to build my cashflow now, my nest egg is not close to where it needs to be and to be frank I am concerned with our economy overall.  I realize there are risks in real estate but I feel much more comfortable owning cash flowing real estate then the stock market.  So I would welcome feedback positive or negative on my thinking.  

Thank you in advance,

Rodney

[George Blower]

@Rodney Buford

Keep in mind that in order to take a distribution under the CARES Act you must have been impacted by the virus in one of the enumerated ways.

If so, you can take a penalty-free distribution (as well as waive the 20% withholding requirement) from your 401k (assuming that the employer allows it) anytime between 1/1/2020 and 12/31/2020. You may avoid the taxes if you deposit the funds in an eligible retirement plan (which includes anIRA) within "3 years and a day" of the date of the COVID-19 distribution (note: compare to a 60-day rollover). Please note that the account into which the funds are deposited must be the same type of account from which the funds were first withdrawn (e.g. withdrawal of pre-tax funds from a 401k could be deposited in a pre-tax IRA but not a Roth IRA - "like to like").