Owner of IRA Advantage, David Moore speaks on the basics of self-directed IRA’s and how they are created. Learn how you can use your self-directed real estate IRA today!

How Are Self-Directed Real Estate IRA’s Created?

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So how do we create a self-directed IRA? If we’re talking about a company-sponsored plan like a 401k for example, if it’s a current plan and you’re under 59 and a half then we’re stuck. That money from the plan is going to be there, if you hit 59 and a half then you can take funds out without a tax problem. And if it’s a previous employer plan you can roll that money into a new 401k plan, or a new IRA if you’d like.

How Are Self-Directed Real Estate IRA's Created

Once again, 59 and a half, that’s the big date. Under 59 and a half if you want to take out your money to go buy, and you’re in let’s say a Nike plant, you’re not going to go buy real estate with it. So you’re going to either have to quit your job to get access to the money, or wait ’til you’re 59 and a half. And I’ve had people quit their jobs. It’s really crazy.

I had one guy that was in the process of switching jobs. So he quit the one job, we started the process, and he took the new job before we had access to those funds. The problem was that the new job was with the same parent company as the old job, so the new job ended up absorbing those funds and we couldn’t get them out. It would have been nice if we had a little break, that way we could’ve gotten stuff out before the new job was taken. But in that situation it was just too fast and we couldn’t get it. So understand that’s the situation with the 401k plan or company-sponsored plans.

Any IRA can become a Self-directed Real Estate IRA.

If we’re talking about doing what’s called a rollover business start up where we’re creating a new business owned by the retirement account, then we’re in a situation where if we are sourcing it with an IRA we need to understand what it is. If it’s a beneficiary IRA then we cannot work with it. A beneficiary IRA is one that’s been inherited, and we can’t use Roth IRA funds going into those either.

But if we are talking about IRAs we can move an IRA into any new self-direct IRA, we just have some restrictions moving IRAs into 401k plans, or like I said, when the source of funds is the 401k plan we need to understand the person’s employment situation.