Real estate investing can be a lucrative strategy for growing your wealth. What if you learned that you could leverage your 401k to invest in property? This post will discuss how you can do just that.

First and foremost, it’s critical to understand that using your 401k to fund a real estate investment involves borrowing from your retirement savings, which inherently carries some risk. However, with a well-thought-out strategy and careful planning, you can mitigate these risks while unlocking potentially significant returns.

Borrowing from Your 401k

The first step is understanding how you can borrow from your 401k. Many employer-sponsored 401k plans permit loans, allowing you to borrow up to 50% of your vested account balance or $50,000, whichever is less. You’d need to pay this back, typically within five years, with interest.

Rollover as Business Startup (ROBS)

An alternative to borrowing from your 401k is a Rollover as a Business Startup (ROBS). A ROBS lets you invest retirement funds in a new business without incurring early withdrawal penalties or taxes. This strategy can be particularly useful for those who want to invest in rental properties or start a real estate business.

Self-Directed 401k

Another method is to use a Self-Directed 401k. Unlike traditional 401k plans, a Self-Directed 401k allows you to invest in a wide variety of assets, including real estate. This empowers you to diversify your retirement portfolio beyond traditional stocks and bonds.

Considerations and Risks

While using your 401k to invest in property can be profitable, it’s important to understand the potential risks. You’ll be tying up funds that would otherwise be growing tax-deferred in your 401k. If your real estate investment doesn’t pan out as you hope, you could end up jeopardizing your retirement savings.

Leveraging your 401k to invest in real estate can be a smart way to diversify your investment portfolio and potentially achieve higher returns. However, it’s crucial to do your due diligence, consider all potential risks, and possibly consult with a financial advisor before leaping. If you need financing for commercial real estate, contact Golden Capital Solutions today.