Let's do a math exercise:
Let's say you've done very well, the stock market has been good to you, and you now have $500,000 in your 401(k). Let's ignore the high (and hidden) fees and any taxes they charge for now. So, now you've reached retirement and you decide to ride the waves of your long years investing in the stock market. You withdraw at 4% so you don't reduce your principal. That would give you $20,000 a year to live on. Can you live on $20,000 a year? Anyway; then the unthinkable happens, a 20% crash to the stock market. You are now living on $16,000 a year.
However, for the sake of comparison, you have 5 properties and each year you refinance one of them and take $50,000 out, which is tax free by the way, and a renter is making the payment for you and you now have $4,166 a month to live on tax free. The next year you refinance the next property and so on. Which one makes you better off?
I know, "math is hard". ;-)
Ignorance can be fixed by learning a bit. Look up Schiller, Bogle, Solin, Malkiel, etc.
This comparison is apples to bananas. It's really useless, honestly. People should stop wasting time on that ridiculous discourse.
A fair 401k target should be 2M to 3M, not 500k. If you have 500k, you missed the boat. It's game over.
Does REI have the "possibility" to provide higher CoC returns? Sure, but it requires a lot of work. Buying and holding (through ups and downs) broadly diversified low cost index funds must be absolutely boring and will provide a great return over time - with zero effort. It all depends how you want to allocate your time.
It is absolutely great to also have properties or owning a few extra businesses. There are also franchises, restaurants, loans, etc. Is funny how people here limit investments to only two categories.
Your dreaded 25 years of stock market recovery is more like 5 years. Horrible advice based on ignorance. Compounding math is hard.
Then, imagine if you stayed the course and continued investing during the steep recovery. FINRA has great funds analyzers, play with that. Again, zero effort.
RE is called the dumb man investment. It's too simple, it works or it doesn't. It requires a lot of work, however. One can make a pretty good buck, some extra cash, or 2009 pain.
I like diversity and will pick up more properties down the road if the opportunity arises. This makes no sense right now.
Come on man, be real. If you don't already have $2,000,000 in your 401(k) in the HOTTEST!!! run of the Stock Market increase EVER!!! . . . . . . . . . . . . . then how do you propose to hit that number? You've run out of time. Game over!
You need a better plan. (nothing personal, time waits for no man)
Now, at 50 years old a guy without a 401(k) can still buy 5 properties and do as I said in my previous post, but he can't achieve $2,000,000 in the stock market. It's just not going to happen. I don't have a pony in this race. I don't have a 401(k). (I make too much to benefit from one.)
But, Here are the realities:
https://www.investopedia.com/a...
Twentysomethings (Age 20–29)
- Average 401(k) balance: $10,500
- Contribution rate (% of income): 7%
Thirtysomethings (Age 30–39)
- Average 401(k) balance: $38,400
- Contribution rate (% of income): 8%
Fortysomethings (Age 40–49)
- Average 401(k) balance: $93,400
- Contribution rate (% of income): 8%
Fiftysomethings (Age 50–59)
- Average 401(k) balance: $160,000
- Contribution rate (% of income): 10%
Sixtysomethings (Age 60–69)
- Average 401(k) balance: $182,100
- Contribution rate (% of income): 11%
How does any of that make sense? How are people supposed to live on so little? 401(k)'s are a very bad joke.
Find the definition of "average". The average Joe will outlive his assets.
401ks were never supposed to be a retirement mechanism, they are defer bonuses. Research about how Americans got screwed by eliminating pensions.
Regardless, 2M/3M is not out of the question. A napkin calculation is "save 20% for 40 years to retire at 75% of your income". Then, it follows that 2M = 80k year, 3M =120 year. This money should last 25 to 30 years.
Ha, ha, ha That's hilarious. Who saves 20% of their income every year for 40 years? You're not married yet huh?
If you save 20% of your income for 40 years and you never divorce, you never have a major medical emergency (the number one reason people file for bankruptcy), the government never changes how they tax 401(k)s (that in itself is a huge problem down the road for investors), if we don't "overspend as a country" and go into hyper inflation, (think about that one for a minute), if we never have another war like Vietnam or WWII, if we never have an energy crisis like 1973, if Wall Street is Honest - you still have black swan events and hidden fees in your 401(k). You just don't kow it yet. Ask your 401(k) custodian how much winds up in your hand AFTER all fees.
Who saves 20%? you should. Otherwise, you will outlive your assets or become a burden to your family and society.
To clarify, my previous responses are not meant for the "google research expert" who displays a great "copy and paste" agility in order to share half baked ideas. I couldn't care any less. This is to highlight a previous comment I made, "be careful with the hype and bad advice you will find here." I hope the above helps illustrate that statement.
End of the conversation on my part, good luck to the OP with your research.