As more people realize the value of real estate investing for building long-term wealth, using retirement accounts like 401k to invest in real estate has become an attractive option. Fidelity is one of the largest 401k providers that offers real estate investment choices. This article will explore key options and strategies to use 401k for real estate investment on Fidelity.
Self-directed 401k allows investing in private real estate deals
The most flexible way to invest 401k into real estate is using a self-directed 401k account. This allows you to invest retirement funds into alternative assets like private real estate deals, tax liens, private companies etc. Fidelity has partnerships with self-directed IRA custodians like NuView Trust Company that can be used for this purpose.
Publicly traded REITs offer easy real estate exposure
If you don’t want the hassles of being a direct real estate owner, publicly traded REITs(Real Estate Investment Trusts) offer an easy way to get exposure. Fidelity offers a number of REIT mutual funds and ETFs covering various real estate sectors like residential, healthcare, mortgages etc. These provide instant diversification.
Use IRA rollover to consolidate old 401ks into real estate
If you have old 401k accounts lying around from previous employers, you can consolidate them by doing an IRA rollover to self-directed IRA accounts. This gives you more flexibility to invest in alternative real estate deals in a tax-advantaged manner. But you need to be aware of rules around 401k to IRA rollovers.
Consider risks and expertise needed in direct real estate investing
While investing retirement savings into tangible real estate seems attractive, also consider if you have the expertise and time needed to find/manage good rental properties. REITs provide similar benefits without direct ownership hassles. As with any investment, diversification across asset classes is key.
Using retirement accounts like 401k or IRAs to invest directly in real estate deals provides more flexibility and tax benefits compared to regular brokerage accounts. But alternatives like REITs also offer easy exposure for passive investors. Consider all options as per your risk appetite, investment horizon and expertise.