Posted by Randy on June 10, 2003 at 11:02:22:
Shannon I don?t believe a self directed IRA allows that. If you take a full disbursement (cash out) that?s the worse thing to consider? fully taxable income plus 20% penalty?ouch! If you?re in a qualified plan at your new employer you may consider rolling your ?Old Money? into your new plan and then taking a loan from your new plan.
Regarding a loan I don?t recommend it. Depending on your age and the type of investments your fund is in, a loan can be very expensive. The loan is taxable income if not repaid. You lose the earning power of the funds withdrawn while their out. Remember that money is growing tax free, in a 28% tax bracket even with only a 5% average earning, that?s an expensive loan.
Now if you were to do a one time loan to flip a property and pay the loan off 30-60 day?s later, take your profit from the deal and go find another?that might be worth it.
I say this from experience?several years ago I did just that (almost), I borrowed $5,000 from my 401K and bought a little house at auction for $32,000. Comps showed the property was worth $50,000 I was smiling all the way to the bank?I thought. To make a long story short the deal went bad and I lost my $5,000?. I?ve never figured out EXACTLY what that mistake cost me, but I can assure you any loan shark or hard money lender would have been a lot cheaper?