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IRA Cashout

Old 10-18-2016, 02:17 PM
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Old 10-18-2016, 02:24 PM
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Think you can invest the whole amount into the land tax free , as long as you have someone other than yourself manage the investment.Check with your CPA.
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Old 10-18-2016, 03:05 PM
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Originally Posted by Doublehook View Post
Think you can invest the whole amount into the land tax free , as long as you have someone other than yourself manage the investment.Check with your CPA.
If that is the case it might be something to consider.

Otherwise I'd need more info. Income, age, occupation. If the OP is young and has a great career it might make sense. If older, without an increasing income level to look forward to... probably not a good idea.

Yes, I cashed out a 401K once. I ended up owing the IRS more than I had left at the end of the year, and was behind for a few years. I regretted doing it - but luckily I was younger and able to learn from it.
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Old 10-18-2016, 03:48 PM
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I assume the amount needed to buy your sister out is above your contributions into the IRA?
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Old 10-18-2016, 04:21 PM
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I would not cash out my IRA to buy land. Certainly not land I already owned 50% of. Even more so if I would not be the sole owner. You need to think about that for a minute. You drain your retirement for a 25% ownership increase. And I certainly wouldn't count on timber as a source of regular income. I have family in the timber/pulp business and it is nowhere near the industry it was.
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Old 10-18-2016, 04:59 PM
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if you are young enough that you have to pay the 10% penalty on top of the income tax from it then it is not a good idea
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Old 10-18-2016, 05:01 PM
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op said ira but if you are 55+ 401k can be accessed penalty free.
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Old 10-18-2016, 05:36 PM
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Watch out for probibited transactions if you own it in your IRA. And IRAs are not always tax free. An IRA can be re required to file a tax return and pay taxes. (UBTI)

How's that timber going to be taxed?
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Old 10-18-2016, 05:49 PM
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I've done it. To me an IRA is just an investment vehicle with a built-in gain. If you find a place you'd rather invest it, then you just have to reconcile the "loss" of past tax savings, plus penalty, plus difference in expected return. As my regular 401k grows, it becomes easier for me to do that math. Especially when I consider my distaste for the stock market and want to carry some hard assets for diversification.

All that to say, I wouldn't do it for partial ownership. If you're not taking land value appreciation into account, you are already a partial owner, and you're only counting timber revenue, I can't see how it improves on market returns or your diversification.
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Old 10-18-2016, 05:51 PM
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If you've got to pay the 10% penalty AND income tax on the gross withdrawal, you might consider not doing the deal. It'd cost you less to just borrow the $ from a credit union to make the purchase vs. 10% & paying income tax.

Of course it depends on how much you've got in that IRA and how much you're withdrawing.
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Old 10-18-2016, 05:54 PM
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Originally Posted by Slobberknocker View Post
I can't see how it improves on market returns or your diversification.
And, as soon as I hit send, I started thinking of ways it does improve your returns. For all I know, it's forested in some rare Brazilian hardwood, and she's selling it for $1 an acre lol. Obviously we don't have enough info to do the math for you, and I shouldn't make a statement like that. Sorry.
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Old 10-18-2016, 05:58 PM
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I smashed out my 401k few months back and it was like 10%

I stuck it into a fund that earns 16% and I can cash out any time. Made sense
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Old 10-18-2016, 06:00 PM
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Originally Posted by williamwallus View Post
I smashed out my 401k few months back and it was like 10%

I stuck it into a fund that earns 16% and I can cash out any time. Made sense
16%?
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Old 10-18-2016, 06:16 PM
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Originally Posted by williamwallus View Post
I smashed out my 401k few months back and it was like 10%

I stuck it into a fund that earns 16% and I can cash out any time. Made sense
Legally?

I'm not a financial or tax guy, but I will say this - they ain't makin anymore land.
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Old 10-18-2016, 06:28 PM
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Originally Posted by williamwallus View Post
I smashed out my 401k few months back and it was like 10%

I stuck it into a fund that earns 16% and I can cash out any time. Made sense

They may have withheld 10% but that aint gonna be all if it is a sizeable amount


Most times it is 25-35% and since I assume you are in FL then no state tax

I see folks come in my office ALL the time and thing because there was 10-20% withheld that they have "paid the tax" till i get done with them
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Old 10-18-2016, 06:36 PM
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Originally Posted by GASeminole View Post
Who has done it and do you regret it?

I am considering cashing out my IRA to buy out my sister's share of ownership of some land that I intend to hold indefinitely. My thought is the land is an investment as well, but a hard asset, and I would be able to cut timber here and there for income if needed.

A detail I should add, and one of the many things holding me back, is that I would still not be 100% owner of this parcel even after buying her portion out. I am at 50% now, and would be at 75% if I bought her out. The cost of ownership is simply taxes as it is vacant land, and we have it in a conservation easement, so it is relatively negligible.

Any advice welcomed and thanks in advance,

GA Seminole

Too many variables to get straight answer things like value of land and potential to increase in value over the years, do you have another retirement plan, will you continue funding IRA, marrried, age, for the most part land is not very liquid so how quick will it sell if you need the cash

I do have a couple of clients that have bought property within their IRA but there are some VERY strict guidelines . Pretty much NO personal use at all, NONE.
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Old 10-18-2016, 06:46 PM
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I cashed out and opened a self managed IRA.

There are strict guidelines on who you can purchase or sell property to/from.

Nothing you own or no one in your family owns. So that excludes your land unless you want to pay taxes on it and take the 10% hit.

I purchased houses and deep water access lots. Houses are a much better deal for me. So far the value of the lots have not kept up with the taxes and HOA dues. Houses are bring in about 12%.

Doug
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Old 10-18-2016, 06:56 PM
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Originally Posted by williamwallus View Post
I smashed out my 401k few months back and it was like 10%

I stuck it into a fund that earns 16% and I can cash out any time. Made sense
depends on your situation, 10% could be just the penalty and then still need to pay income tax
so many do not think this stuff out well
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Old 10-19-2016, 03:47 AM
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Originally Posted by williamwallus View Post
I smashed out my 401k few months back and it was like 10%

I stuck it into a fund that earns 16% and I can cash out any time. Made sense
could you of just rolled the 401K into an IRA and then bought that 16% fund????? Would of saved you penalty and taxes
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Old 10-19-2016, 03:58 AM
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Originally Posted by Boataholic View Post
could you of just rolled the 401K into an IRA and then bought that 16% fund????? Would of saved you penalty and taxes
It's not a stock
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