Can I Move My 401(k) Into Real Estate? Rules and Steps

Yes, you may be able to move eligible 401(k) funds into a self-directed IRA and use that account to purchase real estate, but the property must be an investment owned by the IRA rather than a home you use personally. Whether you can move the money depends on your plan’s rules and your circumstances; for example, a former employer’s plan may offer rollover options that a current employer’s plan does not.

First, ask your plan administrator whether your funds are eligible for a rollover, then open a self-directed IRA with a custodian that permits real estate investments and arrange a direct rollover from your plan. Moving pretax 401(k) funds directly to a traditional IRA generally avoids immediate income tax, while moving pretax funds to a Roth IRA generally creates taxable income in the year of conversion.

Your IRA purchases and owns the property, so expenses such as repairs, insurance, and taxes generally must be paid from IRA funds, and rental income must return to the IRA rather than to you personally. You also must avoid prohibited transactions, including using the property yourself or dealing with certain family members; violations can jeopardize the account’s tax advantages.

Check the product’s listed specifications when evaluating what rules apply to the property.

Real estate can be less liquid than publicly traded investments, so consider whether your IRA can cover ongoing expenses and, when applicable, required minimum distributions without forcing a property sale. Financing or certain business activities can also create tax complications, so we recommend discussing your plans with a qualified tax professional and your custodian before you buy; our self-directed IRA real estate guide and our How to Use Retirement Funds to Buy Real Estate eBook are resources to explore as you plan.