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401k for farm ground

H

Hodge

Active Member
I've looked into trying to get my 401k and roll it over into farm land but there wasn't way I could do it with me still being employed at my current job. However I can either borrow up to $50,000 and pay it back in 5 years or I was told I can get it all out for either medical bills or if I buy a house. Well it just so happens I'm moving! So my question is, is it a dumb idea to take it all out and say I'm using it to buy a house then take it and use it for a down payment on a farm (my current house is already paid off, so once it sells I'll just take the money I used from my 401k. The reason I ask is because it seems like everyone I bounce this off of says its dumb, but I think they just have the mental idea that touching your 401k is a bad idea. I think it wouldn't be that smart of an idea to use it to pay for a house but I'm not doing that. I want to invest in farm ground and be able to hunt on my investment along the way. let me know what you guys think.

I've been at my current job for just a little over 5 years and I'm 29 years old.
 
I would be darn careful about taking it out "to buy a house". All kinds of tax implications and I would imagine they're pretty strict about following that money trail. I think your best course would be to give your self a loan for the down payment for the land, and pay yourself back once your original house sells.

I'm anything but a financial advisor, but I would not pull money out of your 401(k) to buy land. It sounds like you have done a great job contributing to your retirement thus far, consider just investing to meet your full company match then roll the rest into a more liquid investment to eventually buy property. Having said that, I've made more profit the past five years buying, fixing up and selling properties than my 410K has grown.
 
I mean technically my 401K would be used for the "house." Wouldn't be up to me, to do what I want with the money I sell my house with? maybe I'm wrong. I know I would have to pay taxes on it to get it out obviously.
 
Only Live 1 time, cant wait till you retire to start living. Just they way I look at it.. Go for it man get a piece of heaven.
 
I think you will find that they will not just hand the money over because you say you are buying a house. Most plans have qualifying paperwork to fill out before it is paid out.
 
Since you are not over 59 1/2 years old you will be hit with a 10% penalty plus your tax rate. so the government will take roughly 40% of anything you withdrawal. plus you are unplugging a good investment for your future. Also, definitely do not take a 401k loan. if your job ends for some reason, like you find a new job or get laid off the loan is due in full in 60 days. I love land, but save up and buy it right when you get a little more cash on hand. If you left the company you could possibly roll it into a self directed ira and buy land without any taxes or penalties, but it's somewhat complicated.
 
Being a 27 year old that would give my left arm to own a farm I understand where you're coming from. I say this because I've talked through these situations with clients for several years and it's never once made sense to take a withdrawal to purchase land. I'm a financial advisor that loves to hunt as much as the next guy but I'd take $15 and buy a copy of Dave Ramsey The Total Money Makeover. Stick to the plan: pay down debt, continue to save in your 401k, and you'll be debt free and buying a farm before you know it, with a great 401k to go with it. Yes, it sucks to wait but it'll be worth it to do it right. Just my 2 cents
 
thanks for the advice fellas. Seems like the majority thinks its not that good of an idea to take the money out. I have a stock purchase program as well, where I can put up to 10% of paycheck towards it and every quarter they buy stock at whichever price is lower from the beginning of the quarter or the last day of the quarter then take 10% off of that. Think I will just sit on that money for awhile until I get enough to buy something.

Just wanted to see what you guys thought with me buying a new house soon, I thought I might have a loop hole to get some money out of my 401K.
 
Don't touch that 401...sell your house use that money to buy a cheaper/smaller house and use that money you made on your old house to pay cash for your new cheaper house and the leftover will be a nice down payment on a small chunk of land!
 
There are situations where a loan makes sense, but they are few and far between. Talk to a financial advisor regarding your options. The self directed IRA is NOT an option because you are not allowed to realize any personal gain from the property and all money must go back into the land or account.
 
Most 401's will let you borrow a percentage of what you have saved. Like others have said it's not the best option but if you have to the loan is usually low interest and you're paying yourself back.
 
You can roll a 401k into a self directed IRA if you have left the company. A self directed IRA can purchase land... Timber, crop, etc..

I've done it. You have to follow some guidelines, and if under 59 1/2 you cannot use the land in a self directed IRA for hunting/rec.

I split the parcel into IRA and non-IRA ownership for that reason, now I can use it. It's worked well for me, but this was not a large amount of money that I needed for retirement, so it just depends on the situation!
 
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So, to make clear... I do have a chunk in 401k from company I worked for out of college. Would love to cash out of that by converting into IRA and then putting that IRA into PART of a piece of land. Doable then the way I'm hearing this?

My 2 cents and just what I am comfortable with.... I've done stocks, mutual funds, 401k's and IRA's for over 20 years now. I'm 37 and yes, I started when I was a teenager on a very small scale, buying little bits of this and that. Been doing 401k since working full time outta college at 22. Maybe a few investments have done OK over that time, a FEW. My 401k has done well in last couple years BUT that's after it went down the tubes. Yes, it's a little ahead now, sure. To ME, only me, I simply have no "faith" in stocks, mutual funds, etc. Digits & $ signs on my computer screen, whoopidy-do!!! Goes up and crashes down every few years and not a lot I can do with the PIECE OF PAPER I get in the mail or the digits I see on a screen. I think a decent chunk of the funds are a scam as well with stupid-high management fees & rip off's. I'll keep doing them and I recommend others do em - especially with matches & tax advantages. But, I'm "not a fan", I'll just say that. Crap really hits the fan..... Have fun with your "piece of paper" or even your "GOLD BARS" - I'd rather have something I can grow things on, hunt, fish, log, live on, etc. So of course I don't want this to at all come across like advice, cause it shouldn't and isn't BUT - if my wife would be ok with cashing all in for land, I could care frigin less to lose 10% in a penalty & pay the taxes I'll end up paying sometime anyways. Ya, it's a STEP ABOVE Social Security but I think all that stuff is just a bunch of garbage. Not advice here & I know folks do really well with investments and worst thing you can do is NOTHING but just throwing my 2 cents out there.... Which is likely 2 cents more than I'll be receiving from the Bankrupt Social Security fund OR what will remain when the Clinton's & Bernie's of the world decide to change the laws & leave me with around 2 cents remaining in my 401k after they get their fair share to spread out to others who deserve it more. :)
 
You sure could Skip! No penalties... I'd put the farm/tillable portion of the land in the self directed IRA. All income must go into the IRA and you cannot farm yourself.

CRP can be a headache as well, don't rule out timber as you could grow veneer walnut and oak and harvest some day. The IRS rules out rec use...so make sure you follow guidelines.

A Self Directed Roth IRA could be even better yet, as income would be tax free for as long as you keep the farm.
 
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This would be technically my first house, since the one I live in now was bought and paid for by my wife. There is a guy I work with that just recently did this to buy a house. I wouldn't be doing this to buy a house. I wanted to do it as a loop hole to get my money out. Like people have mentioned, I imagine they would be very interested to see where my money went. Since the house I live in now is technically my wives and I put my 401K on my new house and then I have the money from the house I live in now in my pocket, then it would be farm buying time.

I just wanted to bounce the idea of you guys since many of you would have some good input. I'm not leaning one way or another really. Just wanted to hear opinions on the topic. Thanks.
 
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