Keep 401K or invest $ on a rental property?

[Kitty Jedra]

Hello Everyone,

I am in my mid fifties and thinking of how to best prepare for retirement. I have about $70,000 in a 401K and wondering if it would be wise take this money and invest it in a rental/cash flow property. I realize that Uncle Sam will be taking a good part of the 401K if I withdrew it before retirement. Your thoughts would be greatly appreciated!

Kitty

[Michael R.]

I'm not an accountant so take my advice with a grain of salt, but I would avoid paying such a huge chunk in penalty and taxes by doing the early withdrawal.  One option you may want to explore is taking out a loan from your 401k.  Depending on the company that services your account, you can borrow up to 50% of your vested balance up to $50,000.  You make loan payments back to your 401k account from your payroll check at generally 1-2 points above the prime rate.  It's a pretty cool option that I took advantage of to get started.  I would talk to whomever services your 401k to see what your options are.