What You Need to Know about Rolling a 401K into an IRA

Should You Roll Your 401k Into an IRA?

Without question, the most beneficial aspect of setting aside money in a 401K is to take advantage of matching contributions from an employer. There are few other ways to double your monthly contributions in such a short amount of time. But should those matching funds disappear, you reach your annual contribution limits, or you change jobs, you may find rolling your funds into an IRA (individual retirement account) is the better investment vehicle for you.

IRAs offer much more flexibility in investment options than 401Ks do, and it’s a retirement account that’s under your control. To some degree, you have that option with a 401K, but not to the extent you do with an IRA. While having more options increases risk, it also affords you the opportunity to fine-tune and select investments that interest you and those for which you have enough background to make sound decisions.

Investment Types to Consider

Types of investments that have proven track records include:

  • Bonds. Unless interest rates climb substantially, bonds still provide a good, low-risk payback.
  • Peer to Peer Lending (P2P). These are recent developments in the investment field and match people who need capital for a venture, but can’t (or won’t) get it through a bank or lending institution. In their few years, P2P groups have grown into a billion dollar activity.  Forbes recommends P2P investments as a safe and solid investment with good returns for 2017.
  • Real estate. Housing continues to be strong, especially in the rental sector, which was unaffected by the mortgage crises of a few years back. In fact, the reverse occurred. As foreclosures mounted, rental vacancy rates fell, and rents have been on the rise since. Real estate is good fit for a retirement account, since it returns a positive cash flow and offers long-term asset growth.Few IRA investments give you the chance to leverage your money as easily as real estate does. Once you meet the 20 percent down payment requirement for investment properties, you can borrow the remaining 80 percent at the lowest interest rates available for any other kind of consumer debt financing.It’s also offers some of the best tax advantages of any other investment. Nearly every expense associated with owning rental properties is an allowed deduction under current tax rules. Travel expenses are deductible, as are the principal and interest payments, taxes, insurance and all maintenance.Investment properties can be depreciated, as well as improvements to them. Buying a property in an area where you vacation or want to retire gives you the chance to deduct some of your travel expenses.

Property management companies simplify owning rental properties because they provide services for both owners and tenants in local and distant locations. They can step in at any stage of a transaction, from pre-purchase services to leasing and post-move-out cleanup.

In terms of payback, real estate has been appreciating about 5 percent per year, although rates vary across the country at any given time. On a monthly basis, the property will return a positive cash flow to offset holding and operating expenses.

Before planning your retirement investments, it’s always a good idea to consult with your tax or investment advisors to learn what best options may be, and which plans will benefit you most. Reaching out to a real estate investment professional will give you answers to questions you may have about property acquisition, financing, leasing and maintenance.

See also Questions to Ask Property Management Companies

Learn More About Rolling Your 401K Into an IRA


JWB has over 10 years experience managing turnkey rental property investments. We have a consistent approach that delivers steady cash flow from our clients investment properties. Curious what your cash flow could be from one of our rental properties? Try our cash flow calculator or contact us to learn more.


Schedule Now

If you’re ready to get started with JWB, schedule a strategy session with our property investing experts now!