Do I have to retire
L1: Do I have to retireDo I actually have to retire to set up an SEPP under IRS rule 72(t)? I have a large account and am only 50 but would like to buy a retirement property while the market and interest rates are so good.2010-12-01 03:01, By: Colo Blonde, IP: [220.127.116.11]
L2: Do I have to retire1. You do not have to retire in order to set up a SEPP 72-Tplan.
2. DO NOT BUY REAL ESTATE IN A RETIREMENT PLAN, for thefollowing reasons, even though there are many promotors who are espousing the “self-directed IRA” approach, and will provide legalopinions that it is allowed, which it is, but not the pitfalls:
a. You get -0- tax benefit from all expenses. There are no tax deductions.
b. You get -0- tax benefit from Depreciation. There are no tax deductions.
c. You probably bought the property because you expect it to go up in value. However, when you sell it at a profit, thegain is taxed at the regular higher tax rates, rather than as a long-term capital gain at the lower tax rates. Also, if you sell it at a loss, you cannot take the loss on your tax return.
However, if you are buying the property as a 2nd home, andwill use the distributions to make, or help make, the mortgage payments,then you could use your approach if you can buy it at a real bargain.
BUT, remember that you will be tieing up your retirement funds in real estate, which unfortunately could be illiquid when you need it, as many people found out over the past couple of years when they could not sell their property.2010-12-01 04:21, By: dlzallestaxes, IP: [18.104.22.168]