401K and Real Estate Investing - An Overview By: Tom Dunn Is it possible to combine your 401k and real estate investing? Wouldn't it be great to invest in real estate with a maximum amount of pre-tax dollars, realize the huge gains possible only with real estate investing, and then re-invest those dollars in your tax-free 401k? Of course it would, and there are ways for the savvy investor to combine their 401k and real estate investing. First, you could borrow funds from your 401k. This is not necessarily the best way to combine your 401k and real estate investing, but it might be worth looking into if you have no other available funds for investing. Realize that there are limits on the amount you can borrow, and the interest you pay won't be deductible. Choose this option only after doing your homework. The second method of combining your 401k and real estate investing is the IRA roll-over. If your 401k allows you the benefit of rolling over into an Individual Retirement Account, this may be the best way for you to go. Select a specific type of IRA- called a "Self-Directed IRA" to roll your funds into. The Self-Directed IRA is a very powerful investment vehicle that allows you to direct exactly how your money is invested, within certain limits. For instance, you could direct that the money be invested in a REIT (real estate investment trust), an apartment complex, or a strip mall. When you sell and realize a profit, the increase in the IRA is tax-deferred. This is a huge benefit, and you should really consider this method of combining your 401k and real estate investing. One downside to the roll-over - you would be giving up the employer contribution portion of your 401K deposits, if any. Another reason why you should weigh this option carefully before deciding to use it to combine your 401k and real estate investing. Finally, and the simplest method of combining your 401k and real estate investing, is to ask your 401k account manager if they allow the funds to be invested in REIT's directly. Some do, and this is a low risk, high return strategy for a lot of investors. Whatever you do, don't make a hasty decision to combine your 401k and real estate investing. Each of the above methods has a different risk/reward ratio, and you should familiarize yourself with them first, before risking your hard-earned money. Tom Dunn is a successful real estate investor and author of the popular DealFiles Real Estate Investor Stories free newsletter. You are welcome to share this report, unedited and in it's entirety, with anyone you like. You may not remove this text.© 2006 by Tom Dunn. Website: http://www.dealfiles.com e-mail: tom@dealfiles.com

 

Who Should  Start A Roth 401k?

1.   You're relatively young and plan to keep the money invested for a long time.

2.   You're in a low tax bracket today, or feel that tax rates will be higher in the future.

3.   You've always wanted to contribute to a Roth IRA, but your income has consistently been too high for you to put money into one.

4.   You want your heirs to keep as much of the money they inherit from you as possible, since they won't owe income taxes on distributions received from Roth 401k accounts. (However, the amount they inherit from you might be less since you've paid higher taxes in years you contributed to a Roth 401k).

You don't rely on the tax savings realized on your current contributions to your Roth 401k or 403b account to meet your household budget.

 

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