Math of 100K Covid withdraval
Hey guys,
I have been trying to figure out if its more beneficial to take out the 100K from my 401K our not.
Can you please help me with that?
1) Lets say I do not take out and keep it in 401K. Then: 100K at 6% interest will grow in 30 years into 600K...However, I am 45 years old now, so I will be obligated to take out minimum distributions when I turn 59 years old. So technically, the money will be growing for only 14 years...which will grow to 231K at 6 percent interest...Next thing, when I get 59.5 years old, I will only be able to get 4% of the money and it will be taxed, 4 percent of 231K is 9K per year...But to get that 9K per year I have to wait till I turn 59.5 year old. So I keep the money plus I get 9K cash flow from it in 14 years...Since I am making withdrawals, technically the money does not grow anymore... So this 100K will turn into 231K in 14 years, and then it will stop growing further, since I am taking out minimum required distribution..Al of this will work if the market does not crash, or if it will crash it will bounce back. It may not, like in Japan...
2) Lets say I do take this 100K out, and buy a house with it, which will bring me, lets say $850-900 per month in cash flow. Then, that would be roughly 10K per year. If I am looking at 14 years, then it will be 140K in cash flow...Collecting this cash flow for the next 14 years, I can pay off another house with that money, then I will be getting 18K in cashflow per year from 2 paid off houses...Even if the Real estate market crashes, I still will be able to get my cashflow from rentals, may be cash flow will go down a bit, but it still should be there, unlike 401K...
What do you guys think?
What would you pick?
Thank you!