Investing in 401Ks, IRAs or Real Estate

6 Replies

Hello Everyone,

Sorry in advance is this has already been talked about I haven't seen anything on this yet, but I'm new here. I am 26 and have always been very good at saving for retirement. I put 11% of my salary into my companies 401K plan (Pre Tax with company match) along with trying to max out the 5,500 in a Roth IRA as well. I feel as though this should set me up very well for my retirement years but I have been looking into ways to help me retire early, maybe around the age of 40. I am wondering if anyone else has given this any thought?

Since I wouldn't be able to access this money till the age of 59 1/2 I am wondering if it would be better for me to lower the amounts that I am putting into these accounts to either put some into index funds or invest in more real estate. With the contribution levels that I am doing now I am able to set aside some money for real estate investing (I bought my first single family rental early this year) but I am unsure if I should be focusing more on rental since I will be able to live off of the rental revenue at any age. Just looking for thoughts and scenarios that other people may have ran into or have done. 

Thank you!

@Thomas Richardson
I would put the max into your Roth IRA and invest that. You can invest it in real estate, stocks etc. my cup of tea is investing in mortgage notes where I know a lot of passive investors use their IRA to invest because it is mailbox money when your buying performing notes and typically they have plenty of equity and provide double digit returns

Chris Seveney

    Originally posted by @Chris Seveney :

    Thomas Richardson
    I would put the max into your Roth IRA and invest that. You can invest it in real estate, stocks etc. my cup of tea is investing in mortgage notes where I know a lot of passive investors use their IRA to invest because it is mailbox money when your buying performing notes and typically they have plenty of equity and provide double digit returns

     It is actually interesting you mentioned this because I recently listened to a podcast about that but have not looked into it to much yet but it did seem like a decent way to make a "guaranteed" rate of return. Do you have any resourced on this that I could learn more?

    Thank you for the tip!

    @Thomas Richardson

    You may want to look into investing your ROTH IRA into real estate. The gains will grow tax free. Investing in a Roth IRA in real estate is good way to grow your ROTH IRA.

    Originally posted by @Thomas Richardson :
    Originally posted by @Chris Seveney:

    Thomas Richardson
    I would put the max into your Roth IRA and invest that. You can invest it in real estate, stocks etc. my cup of tea is investing in mortgage notes where I know a lot of passive investors use their IRA to invest because it is mailbox money when your buying performing notes and typically they have plenty of equity and provide double digit returns

     It is actually interesting you mentioned this because I recently listened to a podcast about that but have not looked into it to much yet but it did seem like a decent way to make a "guaranteed" rate of return. Do you have any resourced on this that I could learn more?

    Thank you for the tip!

     To learn notes I trained with Scott Carson. He has a podcast and a lot of free videos that can help get your oriented. There are also a lot of other good folks out there as well like Eddie Speed, Martin Saenz and others. 

    I personally like notes because there is a lot of flexibility and control over the amount of risk you take, but there is no such thing as a guaranteed rate of return!

    Dan Deppen

      Thomas, welcome to BiggerPockets and congratulations on starting your real estate investing journey.

      First of all, let me help you understand that you don't invest in IRA or 401k. You make contributions to IRA and 401k. Once you made the contribution, then you can invest those funds inside of your IRA.

      Conventional retirement accounts only allow traditional investments such as stock, bonds and mutual funds (you and I have no control over the performance of those investments). However, it is possible to invest your retirement funds in alternative investments such as real estate, trust deeds, tax liens, private companies, syndication, private lending, etc. etc. To do so you need to rollover your retirement funds into what is known as Self-Directed IRA

      And lastly, it is possible to access your retirement funds prior to age 59 1/2, you can find more details on how to do so in this article: 

      https://www.forbes.com/sites/forbesfinancecouncil/...

      I think you are well ahead of most people in your age group, starting this early and maximizing your Roth IRA investments will set you on the road to financial independence, just stay diligent!

      Dmitriy Fomichenko, Broker

      I’ve been contributing to traditional retirement accounts since I was 22; I’m 44. While some on BP will discount this approach, I find it has worked well for me. However, as you mentioned, you need to be 59.5 years old to access those funds without penalty. I’ve been investing my “walk away” money in real estate to generate income. My goal is to build up enough cash flow to cover the gap between the time I decide to hang it up until I can access my retirement funds. Real estate will then be my “pension” in addition to the investment income from my retirement plans. There’s no one size fits all approach, but I applaud your thought process at 26!

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