Most savers are aware of the advantages of investing in a 401(k) or IRA. The reasons to make the most of these tools are well known. In general terms, setting aside a little each month is painless, and your employer may even make a match, so your money multiplies.
However, for some people, 401(k)s and IRAs are considered a bit too inflexible. We often assume that we are limited to investing what we set aside in mutual fund or money market accounts. If you want to put that money to work, you should be aware that your 401(k) or IRA funds can be used for real estate.
Before you get ready to commit all your 401(k) or IRA savings into property there are a few things you should know. First, and most importantly, the real estate that you can invest in is investment property only. That means you can’t use the home you, or anyone related to you lives in. You also can’t actively manage the property yourself.
You also need to make sure that your particular 401(k) permits funds to be used this manner. That means that first you need to contact your plan administrator. You may be able to roll your 401(k) funds over to an IRA which might give you more flexibility. Remember though, some IRA managers also do not allow real estate investment.
Even if your 401(k) or IRA prohibits you from investing directly in real estate, you should check to see if there are other ways to take advantage of real estate. Keep in mind also, that a self-directed IRA will likely not have the same limitations of a custodian run account.
Draw Higher Returns
All those caveats aside, you owe it to yourself to learn more about the advantages of how investing in real estate can allow you to get higher returns. Putting a portion of your savings toward real estate will also give your retirement portfolio greater diversity while still offering tax advantages. It’s possible you might have more significant cash flow since the returns on the real estate investment must go back to the IRA account and as such are unlikely to have tax ramifications.
A Savings Portfolio
Your best bet for seeing how you might take advantage of the benefits of using 401(k) or IRA funds for real estate investment is to consult with a professional who is knowledgeable about the rules and regulations. You also want to consult with those well versed in the market for investment properties. Since you’ll need to hire a real estate company to manage your properties, you need to establish a relationship with a firm you can trust. That’s where Katchen Company can help you. Of course, it’s always a good idea to consult with your tax adviser as well.
Real estate can be a perfect addition to your retirement savings portfolio. Do your homework and work with a trusted advisor. You may find yourself with more vibrant savings and peace of mind since you’ll have the money you need when you are ready to make the leap to retirement. And remember that Katchen Company is here for you to help guide you in any capacity.