Rollovers are often the moment when retirement planning becomes active instead of passive. A job change, early retirement, or reaching age 59 and a half can create the legal opportunity to move funds from one retirement account to another without triggering tax, as long as the money stays inside the qualified system.
That rollover window gives you a choice. Leave the money where it is, or reposition it into investments you understand and control.
David Moore, co-founder of IRA Advantage, has worked with investors for decades who want to move beyond traditional Wall Street options. He helps people use rollovers correctly so they can direct retirement funds into real estate, private lending, business ownership, and other investments the law already allows. The key is planning it correctly before the money moves.
When a Rollover Is Available
Certain life events create the legal ability to move retirement funds without triggering tax. When that window opens, you are not taking a distribution. You are shifting money from one retirement account to another and keeping it inside the retirement system.
Common rollover situations include:
- Leaving a job and gaining access to a previous employer 401k
- Reaching age 59 and a half and qualifying for in-service distributions
- Retiring or stepping away from an employer plan
If you are under 59 and a half and still working for the company that sponsors the 401k, you usually cannot access those funds. Once you leave that employer, the prior plan is typically available for rollover.
Planning ahead makes a difference. David has seen situations where someone left a job, started the rollover process, and then accepted a new position tied to the same parent company. Because the plans were considered the same, access to the funds disappeared. A careful review before changing jobs would have prevented the issue.
Rollovers create opportunity, but timing determines whether that opportunity stays open.
A Rollover Does Not Require Moving Everything
Rolling funds into a self-directed retirement account does not mean you have to move your entire retirement balance.
With IRAs, David often recommends transferring only the portion you intend to use in a self-directed capacity. Keeping Wall Street investments in a separate IRA can protect them if a prohibited transaction ever occurs inside the self-directed account.
With traditional pre-tax 401k funds rolling into a solo 401k, consolidating everything into the new plan often makes sense. From there, you can still open a trading account within the 401k for market exposure while preserving flexibility for alternative investments.
The objective is not to abandon diversification. It is to decide which dollars you want under direct control.
Choosing the Right Structure for Your Rollover
Once funds are eligible to move, structure becomes the next decision. There is not just one way to set up a self-directed retirement account. The right vehicle depends on how quickly you need to act, how involved you plan to be in the investment, and whether you are self-employed.
Common structures include:
Basic Self-Directed IRA
Best suited for passive, infrequent, non-time-sensitive investments. The custodian processes transactions and holds title.
Checkbook IRA or IRA LLC
Used when immediacy matters or when you intend to manage assets. The IRA owns a limited liability company, and you serve as manager. The LLC has its own bank account, giving you direct control over execution. The operating agreement must be IRA-specific and properly drafted.
Solo 401k Plan
Designed for self-employed individuals without employees. It provides high contribution limits, no custodian requirement, flexibility similar to a checkbook IRA, no tax on leveraged real estate income, and the ability to borrow up to half the account balance capped at $50,000.
Rollover Business Startup
Combines a 401k plan and a C corporation. The 401k purchases shares in the corporation, and you work for that company. Retirement funds capitalize the business without leaving the retirement system.
The rollover opens the door. The structure determines how you walk through it.
What You Can Invest In
Unless an investment is specifically prohibited, it is allowed.
For IRAs, prohibited investments are limited to collectibles, life insurance contracts, and stock in an S corporation. For 401k plans, the only direct restriction is collectibles.
In most cases, the investment itself is not the problem. The issue is who you transact with.
Understanding Prohibited Transactions
Disqualified parties include you, your spouse, parents and grandparents, children and grandchildren and their spouses, and any entity controlled by those individuals.
You cannot buy from, sell to, personally benefit from, or guarantee loans for your retirement account. You cannot perform physical work on retirement-owned property. Any transaction between or for the benefit of a disqualified party creates a prohibited transaction.
Every time you initiate a deal, pause and ask what you are investing in and who stands on the other side of the transaction. That discipline protects the rollover you worked to create.
Leveraging, Business Activity, and RMDs
Retirement accounts can use leverage, but loans must be nonrecourse. You cannot personally guarantee them.
If an IRA conducts business activity or earns income attributable to borrowed funds, it may be subject to unrelated business taxable income. Solo 401k plans do not face the same leveraged real estate tax exposure.
Required Minimum Distributions (RMDs) begin at age 73 under current law. If your IRA owns real estate, you can take an in-kind distribution of part or all of the asset instead of selling it. In some cases, minority interest discounts may apply when valuing distributed interests. Those decisions require coordination with experienced tax professionals.
Combining Personal and Retirement Funds
Personal funds and retirement funds can be invested together if structured properly.
Ownership can be set up as tenancy in common or through joint membership in a limited liability company. The right approach depends on long-term goals and whether you may eventually distribute the asset from the retirement account.
Structure at acquisition determines flexibility later.
Control Requires Planning
Establishing a self-directed retirement structure typically takes two to four weeks, and rushing it is where people get into trouble. Assigning a contract you signed personally into an IRA can create a prohibited transaction, naming an IRA LLC after yourself can cause confusion about ownership, and using personal insurance for retirement-owned property is not allowed.
The retirement account must be treated as a separate legal person because it is not you. When that distinction stays clear from the beginning, most compliance issues never arise.
Rollovers give you the ability to reposition retirement funds into investments you understand, but that control comes with responsibility. The more deliberate the planning before the money moves, the fewer problems you will face later.
If you are considering rolling funds into a self-directed structure, contact IRA Advantage to speak with a retirement account specialist and make sure the rollover and the structure are set up correctly from day one.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
FAQs About Retirement Account Rollovers
When can I roll over my 401k or IRA?
You can generally roll over retirement funds after leaving an employer, when retiring, or after reaching age 59 and a half if your plan allows in-service distributions. If you are under 59 and a half and still working for the company sponsoring the 401k, you typically cannot access those funds. Once you leave that employer, prior plans are usually eligible for rollover. Timing and plan structure should be reviewed before making a move.
Do I have to move my entire retirement account in a rollover?
No. Rolling funds into a self-directed retirement account does not require moving your entire balance. Many investors transfer only the portion they plan to use for alternative investments and leave the rest in traditional market-based accounts. The right approach depends on your investment strategy and risk management preferences.
What causes a prohibited transaction in a self-directed retirement account?
Prohibited transactions occur when the retirement account transacts with a disqualified party or provides a personal benefit. Disqualified parties include you, your spouse, parents, grandparents, children, grandchildren, and entities controlled by those individuals. Common mistakes include buying property from yourself, personally guaranteeing a loan, working on retirement-owned property, or assigning a contract signed personally into an IRA. Careful planning before moving funds helps prevent these issues.
