Mailbag: Can I Roll My IRA Into A REIT Tax-Free?

Can I Roll My IRA Into A REIT Tax-Free?

We recently received a question from a reader about an under-performing IRA and their options. They asked:

“My wife has a $250K SEP IRA earning 1.5% interest. Can we use any of the funds for real-estate investments? The interest rate is anemic but the tax deduction helps (we try to put about $40K into the SEP IRA every year). If transferring the funds to a real estate investment is permitted by law, what are the tax liabilities /implications?”

Unfortunately, there is no real way to roll funds from an IRA into a REIT without withdrawing them and paying the full tax on that withdrawal.

However, there is absolutely no reason an IRA has to earn 1.5% a year. It sounds like the reader is invested either in funds with high fees or very low rate of return. A diversified portfolio should do much better.

Our Gone-Fishing Portfolio is a simple, diversified portfolio with low volatility. It avoids some of the worst mistakes of the financial services industry by looking for investments that perform regularly year after year instead of whatever flavor-of-the-month stock performed best last year.

Chasing those big returns can risk your whole savings if the big earner loses a great deal of value, as many do, which is why there is always a new best-performing stock next year. Instead, the Gone-Fishing Portfolio takes a longer and broader view of investment.

We even provide a calculator that shows what a Gone-Fishing Portfolio’s recommended asset allocation would look like with your age and desired percentage invested in stocks.


Photo
used here under Flickr Creative Commons.

About the author

Matthew J. Illian, CFP®, AIF®
Matthew J. Illian, CFP®, AIF®

Matthew Illian is part of the Investment Committee at Marotta Wealth Management, Inc. and specializes in small businesses consulting and retirement planning. He is devoted to his lovely wife and three rambunctious boys all under the age of six. Favorite mountain biking trails: Forest Hill Park

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