We like investing in real estate more than 401(k)s.

[Melanie Baldridge]

We like investing in real estate more than 401(k)s.

Both offer tax deferrals, but here's the difference:

If you're making pre-tax contributions to your 401(k), then withdrawals = ordinary income tax.

With real estate gains, you're paying capital gains tax (which is typically lower).

Plus, RE investors get:

1. Cash flow from their properties

2. The ability to do cost segregation and bonus depreciation

3. The ability to use leverage to acquire more attractive assets and amplify their potential gains

4. A physical property that has real-world use and value vs. holding stocks and bonds

5. The ability for 1031 exchanges

6. Access to Opportunity Zones

7. Step up in basis to reduce your heirs' taxes and more

[Greg Scott]

Quote from @Mike Kirby:

Quote from @Greg Scott:

I 100% agree, and would add one thing.

You really can't invest IN a 401K, you invest THROUGH a 401K.  Unfortunately, the things you can invest in through your 401K are typically mutual funds.  Mutual funds will have costs and fees, not all of which must be disclosed.  As a result, Wall Street takes a big portion of your potential profit.

When I finally figured real estate out, I had most of my money tied up in a 401K. I could not get at it for real estate investing unless I quit my job.   If I had not been so diligent about funding my 401K retirement account, I could have retired much earlier.

The company I worked for allowed us to self direct our 401k. I averaged 16% per year from 2000 to 2016 when I retired. Not all 401K’s are like that though. Most of my coworkers did not take advantage of it either🙃

You had a very forward-thinking employer.

My employer offered 20 mutual funds to choose from.