Originally Posted by
crewdawg
Some guys like to filling up with 401a because they can roll over a huge amount into a Roth IRA (ie...way more than the 6,500 contribution limit). Convert that to a Self Directed IRA (SDIRA) and use it to buy real estate. Then everything you make on said real estate goes back into that SDIRA tax free...including any appreciation on the sale of the house. That's one reason why some might want to do it.
Your explanation is spot on. For those who don't grasp the nuances of the above technique.
Roth SD IRA can work for real estate.
Plain SDIRA is a bad idea for real estate because it actually increases your taxes. You pay income tax on an already tax advantaged investment.
When our plan recently (2022?) added the in plan Roth conversion, the use of 401a back door Roth became less popular.
The previous lack of RMDs on Inherited Roth IRAs made them a great estate planning tool. They were Nerfed by a change it tax law requiring distribution in 10 years.