If you've been following society's game plan, then you've likely been putting
money in a 401k or an IRA. And if you're watching this video, you might be
wondering, "How do I actually put that into real estate? Is that possible? Will
there be taxes? Will there be penalties?" My name is Kris Krohn. I am the real
estate maverick. I've done nearly a billion dollars of real estate. Spread
over 4,000 projects. And today, I'm going to show you one of the best ways of funding
your real estate with a 401k or an IRA.
So today, let's talk about a happy 401 K or a sad 401 K. Let's talk about the sad
one. This 401 K or IRA is sitting in the
stock market. I want to share with you a sad tale of why your 401 K is so sad.
It's because it gets told that it's supposed to be in the stock market and
every 8 years the stock market corrects itself. And so it drops 20, 30
percent of its value and then it does boring and then it has a couple years
where it goes up. And it repeats us over and over again. And if you are investing
in the S&P, you would be averaging 9% of an ROI over a 30-year period of time. And
the reason why your 401 K so sad is because in 30 years when you're retired,
9% that compounded did not produce enough money for your retirement.
And you're thinking back, "Man, this stinks. Why did this happen? How did this happen?
A-ha! They seduced me with a match." But I could never really touch my money as
long as working of the company. And so you start thinking, "You know what? I don't
have to stick my head in a garbage can to find out if it stinks. I'm going to get
smart." I'm not going to wait 30 years. So you're watching this video saying, "Kris,
help me figure out how to turn my 401k or my IRA into a happy one." And I'll
share with you how to do that right now. So first of all, if you have a 401 K and
then we're going to talk about IRA. Instead of putting it in the stock market and
subjecting it to low returns... By the way, this isn't bad. But this is most people's
retirement plan. That's called insufficient, is broken, is
guaranteed not to work. So instead we got to do something that's gonna get us
where we want to go. So instead we say, "Hey, here are my options." First of all, if
it is an old or existing 401k from previous employment, you can roll it
option one into a self-directed 401 K. Now, self-directed means that it's
getting pulled out of the stock market. And you can direct it where you want. You
could direct it into real estate that's paid off free and clear. You could direct
it into real estate with non-recourse lending. You could direct it into a REIT.
You could direct it into a private placement memorandum of a private
company that you want to buy ownership in. You're restricted on a lot of the
things that you can do. By self directing it, you've paid no tax and you paid no
penalty. Option number 2 if it's an old 401k is, let's actually go ahead and take
it out. And if you're not yet 59 and a half, you're going to have 10% penalties.
Plus taxes. And at first you're going to say, "Ouch! Kris, pulling all that money out
with the penalty and the taxes it's like 30% of it just flushed away." I'm like,
"It's okay. You were never going to avoid the taxes on your 401 k." And if you want
to wait for the 10% of penalty, you can. But there's a lot of money to make in
the reading time in real estate that you don't want to lose out on. So, rip the
band-aid off. That's the fastest way. Pay your tax and penalty. And now you don't
have the restrictions of a self-directed account. Now, you can invest in real
estate. I'll tell you how to do that in just a minute but first, what if you have
a current 401k? If you have a current 401k then there's probably less than a
10% chance that you can access it. You're going to have to quit your job first. But
you could ask your HR director. "Could I do an in-service distribution?" And if
they say yes, it means that you can access it now. But they'll say, "But... I get
it, I get it. The tax in the penalty." Yes, you could pull it out. And there could be
taxes and penalty depending on your age. And again, you rip that band-aid off and
that money is now free to what? It's now free to do commerce in the wonderful
world of real estate. Now, we're going to talk about that just a minute. But let me
tell you about your IRA. Your IRA does not have this restriction. But it looks
more like this. If it's a Roth IRA, you've already paid taxes on it. Unless you're a
certain age, you might just have penalties. Or if you've put it into an
irregular or a simple IRA and you haven't taxed it yet, yes you could have
taxes and you could have penalties. Now, let me address that for just a minute.
You can't avoid taxes. You can't avoid the penalty if you wait long enough. But
you're the one that put it in there in the first place. So taking it out, I call
that a cost of business. I don't call that a penalty. And it's better to get
your money working today. Why? Because real estate my friend has
the ability of producing 20 to 30% returns. At least when I buy real estate,
we're on average at about 25%. 5 years later, I've taken all the money out and
I've doubled my portfolio, guess what I'm now earning? 50%. 5 years later, I've
doubled again. Guess what I'm earning? 100%. When you're doubling
your money every single year at this point, what does that make the stock
market look like? Inadequate and insufficient. And the
reality is that the stock market might be a good play if you've got enough
money that you've diversified and you're getting where you want to go. But if you
can't show me at your desired retirement age how the stock market with your other
investments will get you to retire, then this is likely the wrong idea. That makes
sense? So, 401ks, IRAs... You pay some tax, you pay
some penalty. It's free. Now, you can maneuver into real estate. Now, this is
something I'm expert at because I've done nearly a billion dollars worth of
real estate. And more than half of it has been funded by 401ks and IRAs. So when it
comes to who should self-direct it, should I self direct it, you need a team
of experts that can share some of that information with you. If you click the
link in the description below, you can actually have a conversation with a
member of my team, you can explore your options even what it would look like to
partner directly with me so that you and I could actually go into the marketplace.
I don't partner with many people these days because time is limited and
precious just like it is for you. But you and I could actually be partnering
together and I could take you into the very best markets where you could be a
passive investor and freaking lighting it up. Crushing it. And if that's your
story then dude, you and I have a lot to look forward to. My team will also share
some other options with you of what it looks like for you to do this on your
own. And have alternatives that are better than a sad 401k or a sad IRA.
Thanks so much for watching today, friend. Hope that was very useful for you. If you
liked it, go ahead and give it a nice thumbs up. Share it with someone else
that has a 401k that needs an additional perspective. And otherwise, make sure that
you are subscribed because I will see you in tomorrow's video.