Should We Use Retirement Money to Buy Real Estate?

Summary

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Episode Summary: Should We Use Retirement Money to Buy Real Estate?

Podcast: Ramsey Everyday Millionaires
Hosts: Dave Ramsey (B), Guest Host (C)
Date: January 21, 2026

Overview

In this episode, the hosts answer a listener’s question about whether to use retirement savings—specifically funds from a 401(k) that can be rolled into an IRA—to invest in real estate. The discussion explores the benefits, logistics, and risks of using self-directed IRAs for real estate, contrasts them with traditional mutual fund investing, and offers practical advice for first-time real estate investors. The hosts emphasize financial discipline, risk management, and the reality of “passive” real estate investing.

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Key Discussion Points and Insights

1. Listener Situation and IRA Options (00:17–01:43)

• Caller (Amelia): Husband's private medical practice is merging; she asks if it’s wise to roll over the existing 401(k) to a self-directed IRA for possible real estate investments rather than into the new company’s 401(k).
• Dave’s Advice:
  • Roll it to an IRA or self-directed IRA for more control and options—avoid keeping it with the company plan.
  • sit down with a Smartvestor Pro to choose solid mutual funds, managing the rollover without tax consequence.

“At a minimum, you sit down with a Smartvestor pro and you pick a series of good mutual funds on your own… there's zero taxes on that.” —Dave Ramsey [01:08]

2. Mechanics and “Rules” of Real Estate in a Self-Directed IRA (01:43–03:47)

• Amelia's 401(k) size: $1.155 million; she and her husband have no current investment real estate experience.
• Dave:
  • It’s possible to allocate some (e.g., $500,000) of retirement funds to buy rental properties through a self-directed IRA, with the rest in mutual funds.
  • Rules: All income and expenses must stay inside the IRA. No money can be personally touched before age 59½; all property management happens “inside” the IRA. Missteps can mean taxes, penalties, or losing the IRA’s tax-advantages.

“You can't pull the rent money out and use it. 100% has to be operated like it's someone else's company.” —Dave Ramsey [02:18]

3. Investing Experience, Work, and Passive vs. Active Investing (03:47–05:57)

• Dave: Highlights the challenges and responsibilities of being a landlord, especially for first-timers.
  • Real estate, especially direct ownership, is not as “passive” as people claim.
  • Mutual funds offer genuine “set it and forget it” investing compared to the continual oversight real estate demands.

“People who say real estate’s passive investing make me laugh. There’s nothing passive about it... I burn a lot more brain calories on my real estate than I do on [mutual funds], but I make more money on it.” —Dave Ramsey [05:08]

4. Current Market Timing and Strategy (05:57–06:41)

• Question: Is now a good time to buy?
• Dave’s Philosophy:
  • It’s always a good time to buy if it’s a bargain—never pay retail.
  • Seek deals: for example, buy a $300,000 house for $250,000 by paying cash and closing quickly.

“If you get a bargain on a piece of real estate, it’s always a good time. Don’t pay retail. Good lord.” —Dave Ramsey [06:04]

5. Flexibility and Risk Mitigation (06:41–07:52)

• Dave: If the listener tries real estate and doesn’t like it, she can sell property within the IRA and shift assets back to mutual funds; there’s flexibility as long as funds stay inside retirement vehicles.
• Examples:
  • Some have successfully flipped houses within IRAs, even turning $1 million into $3 million (all gains inside the IRA, not for current spending).
• The trade-off: You can’t touch those profits for personal use until retirement age.

“If you get into it and you hate it, you can sell them inside the self-directed IRA... and put the car in reverse and back out of this.” —Dave Ramsey [06:41]

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Notable Quotes & Memorable Moments

• On handling real estate in an IRA:

  "It has to be a standalone operation... 100% of the repairs are done from the IRA." —Dave Ramsey [02:38]

• On the difference between mutual funds and real estate investments:

  “With mutual funds, you can set it and forget it... I look at my real estate stuff every month.” —Dave Ramsey [05:19]

• On the reality of ‘passive’ real estate:

  "People who say real estate’s passive investing make me laugh. There’s nothing passive about it, okay?" —Dave Ramsey [05:08]

• On reversibility:

  “You can put the car in reverse and back out of this and maybe not even lose money.” —Dave Ramsey [06:48]

• On the limit of IRA real estate gains:

  “He took his million and made it into three doing flips. All inside the IRA, though. Never... He couldn’t eat out it.” —Dave Ramsey [07:42]

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Timestamps for Key Segments

• 00:17–01:43: Listener’s 401(k) situation & initial advice
• 01:43–03:47: Rules and mechanics of self-directed IRA real estate
• 03:47–05:57: Practical differences: passive vs active investing
• 05:57–06:41: Market timing; how to find a deal
• 06:41–07:52: Flexibility if real estate isn’t a fit; example of growing wealth inside IRA

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Tone and Language

• Practical, slightly humorous (“buckle up, buttercup,” “Don’t pay retail. Good lord.”)
• Warnings about real-world details (“promise, promise, promise and stick with it”)
• Motivational yet realistic, emphasizing diligence and discipline.
• Encourages listeners to seek bargains, prioritize flexibility, and understand the true workflow of real estate investing compared to mutual funds.

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In summary:
The hosts urge listeners to weigh the active demands of real estate investing against its potential rewards, especially within a self-directed IRA. They recommend keeping a balanced, diversified retirement strategy, seeking professional advice, and always buying properties at below-market value. If real estate proves to be too much work or not a fit, there are options to revert funds back into more conventional mutual fund investments—all within the IRA structure for continued tax-advantaged growth.

Transcript

[A]

Foreign.

[B]

This episode is brought to you by Smartvestor. Connect with an investing pro near you at ramseysolutions.com Smartvestor Amelia is in South Carolina. Hi Amelia, how are you?

[A]

Hi, Dave.

[B]

I'm well.

[A]

How are you?

[B]

Better than I deserve. What's up?

[A]

Great. Okay. Well, I'm calling because my husband is a physician and his practice is a private practice and they are about to merge tomorrow with some other groups. And we just figured out that his 401k from his old company, or, you know, the company he's with today that's about to become a new company tomorrow, we don't have to put that into the new company's 401k. I guess we can instead make it a self directed ira.

[B]

Or you could just roll it to an individual ira.

[A]

Yeah, yeah, yeah. So I think that that may open up lots of different options and just wondered if you had any advice like could we consider putting some of it into real estate investments or something like that.

[B]

Okay. All right, good. Well, the first thing is, yes, I would roll it to something. I would not leave it with the new company, 401K. This is an opportunity to move it to something where you have a lot more control and a lot more options. At a minimum, you sit down with a Smartvestor pro and you pick a series of good mutual funds on your own and you manage, you roll it to an ira. There's zero taxes on that. And you manage that from this point forward at a minimum. Okay, if you chose to do a self directed, you could roll some or all of it that way. How much is in it?

[A]

It's our biggest of all of our retirement accounts. It's 1.155 million.

[B]

Do you own other investment real estate now?

[A]

No.

[B]

Okay. How old are you guys?

[A]

52. Okay.

[B]

All right, so here's the yes, you could roll half of it or some of it or all of it. Let's say you moved a half a million over and you bought a couple of $250,000 rental houses in South Carolina and you put the other half a million or the 600,000 in a regular IRA like I was talking about in mutual funds, okay? In the self directed, then you can buy real estate, as you mentioned, with and you could do those two $250,000 houses in there if you wanted to. Okay? The downside is two things. One, people screw up and forget that you can't touch any of the money from those rental houses. Okay? Just like you can't cash out your mutual funds in your IRA until you're 59 and a half, you're going to get penalized, okay? So you can't pull the rent money out and use it 100% has to be operated like it's someone else's company. And you can't embezzle or co mingle funds in any way. It has to be a standalone operation. And 100% of the repairs are done from the IRA. The roof, the heat and air that goes out on the rental, the carpet that has to be replaced on the rental. And 100% of the income created in the rental has to in the ira. You understand?

[A]

Okay, yep, that makes sense.

[B]

Because if you pull one dime out, number one, they may toss you out of the whole thing. But number two, you're going to get penalized on that dime and taxed on that dime when you pull it out. So don't commingle it. And people often mismanage these things. So you got to just be real airtight with that and promise, promise, promise and stick with it. Second thing is, you've never owned any real estate.

[A]

Not as an investment.

[B]

Yeah. And you're getting ready. Be a landlord and buckle up, buttercup. This new experience, okay?

[C]

So when she pulls the rents, those hypothetical rentals that she purchases, she pulls the rents, those money, that money has to immediately go back into the ira.

[B]

You're not pulling it, you're running it as a separate company. It's got its own checking account. You're running it as a company over here like, like it's not you. Like you're doing it for somebody else. So it all stays encapsulated within the ira.

[C]

So there's no liquid money for repairs?

[B]

No, for.

[C]

That's interesting.

[B]

Yeah. Well, the rents would create. Because they're stuck in there, you can't pull the rents out. The rents begin to build up cash.

[C]

Right.

[B]

Over time, hopefully your cash flowing, I mean you're buying paid for two paid for rental properties, right? So hopefully your cash flowing, you're making money. So Those rent, those $2500 rents are piling up and you got to pay property taxes out of that, pay insurance out of that, you got to do your repairs out of that. And what's left in there is profit. But 100% of that profit stays in there. That's what we're doing. So yeah, you just gotta be ready. Because here's the thing, if you get in these things and this is a lot of trouble, you'll make more on those two rentals if you buy them well and manage them well than you will on mutual funds, but you're also going to invest a bunch of time in it.

[A]

Okay, that makes sense because people who.

[B]

Say real estate's passive investing make me laugh. There's nothing passive about it, okay? It's real estate. The beauty of it is it requires some more effort. With mutual funds, you can set it and forget it, look at it once a year, twice a year, and not worry about it. I look at my real estate stuff every month. I get reports on it every single month. And that's just me looking at the people that are managing it for me that work for me. And I look at my mutual funds once a year.

[A]

Uh huh.

[B]

That's. I mean, so I burn a lot more brain calories on my real estate than I do on mother, but I make more money on it. But I love real estate. I'm a real estate guy. So it makes a lot of sense for me. I would not put 100% of it in real estate. I would do something like I outlined, maybe 50%.

[A]

Okay, but do you think with the real estate market where it is right now that this is a good time to consider something like that?

[B]

If you get a bargain on a piece of real estate, it's always a good time.

[A]

Okay.

[B]

Don't pay retail. Good lord.

[A]

Yeah.

[B]

No, we want to get a deal. And so we're going to get a deal. We're going to buy a $300,000 house for 250 because we're writing a check and we're closing Friday. You want to sell your house? It's. So I'm getting a bargain, okay? And we're looking for a deal and not. And deals are hard to find, but they're worth it. It's $50,000 you made, right? Then as soon as you buy it, 50,000 under market. And that's what I'm looking for. If I'm buying, I don't buy houses anymore. But if I was buying houses right now, that's what I'd be doing. I'd be looking for a bargain. Are they everywhere? On every corner? No, they never have been. There's no market that they're everywhere, but you can find them. And there somebody out there needs to sell a house right now and there stands Amelia with cash and yeah, you can do it. And here's the other thing. If you get into it and you hate it, you can sell them inside the self directed Iraq and roll the self directed into mutual funds into a regular ira. You can, you can, you can put the car in reverse and back out of this and maybe not even lose money. But if you just get into it and go, this is a pain in the butt. I don't want to fool with this. And I want to, like, be traveling. I'll be dealing with renters. Right. And so that's okay. That's fine. So you can put the car in reverse and get out of this. So, yeah, if I were you, I'd try it since you got the itch, but I wouldn't try it with more than half and I wouldn't do it. Of course you're going to pay cash. But I actually knew a guy that did this because he was a guy that did flips and he took his million and made it. Made it into three doing flips.

[C]

Wow.

[B]

All inside the ira, though. Never. He couldn't eat out it.

[C]

Well, I was gonna say he had.

[B]

To have a job over here to eat.

[C]

Yeah. You know, it's a fail safe in that way. You're not going to spend your earnings.

[B]

It keeps your hands off of it. Unless you screw up the whole thing. Yeah.