Can You Retire in a Home Purchased With Your IRA?
By Alisha Bennett
We at CheckBook IRA want to wish all of you a very Happy Thanksgiving and hoping that you surround yourself with family or loved ones. This is the time of year when we take stock in our investment performance and pat ourselves on the back or give ourselves a kick in the pants.
Retirement accounts are becoming a major source of security for our financial future and because of this more people want to take as much control as possible over these accounts. That is where we come in. You have as much control as you want, but you can enlist the help of a professional advisor whenever you so desire.
I asked one of our very successful affiliates what they tell their clients to help them secure financial security:
- Stay true to your goals.If you’re invested for the long term, don’t sell off at the first sign of a downturn—maybe that’s the time to invest more.
- Realize what is fake news and what is real news.Too often, people read articles on the Internet written by fear mongers who have sold an investment short and are trying to drive price down. In other words, vet your source or sources of information.
- Invest in what you know.If you’re going to invest in Bitcoin, become a student of cryptocurrency. Don’t be afraid to look at your past career to see how you can invest in your expertise.
- Don’t be afraid to use a financial advisor.Good advisers relish the thought of their clients using checkbook-controlled retirement accounts, for it leads to all kinds of alternative investments and helps them show their value to the client. They can also help shuffle through the fake news and suspect investments.
- Invest with a worst-case scenario – WHAT IS THE WORST THAT CAN HAPPEN.That is one of the reasons I like real estate, for if everything goes into a kerfuffle, I always will have some place to live in or a income producing rental. I have enough stock certificates that are only good for starting a campfire.
We don’t invest to lose money, but to build our financial future and the best way to do that is to have a complete plan. Remember that the greater reward the greater risk.
All in all, the above are a few nuggets that I hope you can use.
Finally, we would like to wish you and your family a very joyous and profitable holiday season.
Stepson? I thought stepkids were OK, as the IRS only prohibits lineal descendants.
Hi Dave,
Step children technically aren’t considered disqualified persons. The only caveat is that the IRS takes the position that if a fiduciary engages in a transaction with someone that may affect the exercise of the fiduciary’s best judgement as a fiduciary, then that is a prohibited transaction. The Congressional report on ERISA said that only applied to the Dept. of Labor prohibited transaction rules, not the IRS rules, so that is the only issue.
Alisha was just being conservative here in saying you shouldn’t rent the house to a step-child. Not to say you couldn’t do it, but just because the step-child isn’t a disqualified person doesn’t mean that any deal with them would fly; there’s another set of questions to answer per what I said above.
Thanks for the question.
Can the property be distributed over multiple years, and if so, how many? At what age must I start taking a distribution? If this is a foreign property, how is exchange rate calculated on the value?
Hey Alex,
Yes you can distribute the property over multiple years to spread out the tax liability; there is no limit to how many years you choose. With your Solo 401(k), you’d have to start taking minimum distributions at age 70 1/2. On foreign property, you’d have to get some sort of appraisal and if the appraisal is made in a local currency, then you can use the links on the IRS’s Foreign Currency and Currency Exchange Rates page. The best one in my opinion is the US Treasury’s exchange rate report, which you can find here.
If you’re thinking of pulling property out of the plan, there’s another more creative way to do it. Give me a call if you’d like to discuss the other option.