Why some high earners should slow down on 401k contributions

I used to think maxing the 401k was always the smart move. That is what the corporate meeting said. That is what the internet said. Then I started buying real estate and saw what real tax benefits look like in real life.

Here is the issue. A lot of BiggerPockets readers are not going to have less income in retirement. You are buying rentals. You are investing in syndications. You are building businesses. If your income in your 50s is about the same or higher than today, pushing taxes into the future does not help as much.

When I invest in larger real estate deals, we often do cost segregation and use one hundred percent bonus depreciation. That creates a big paper loss. If I invest outside a retirement plan, that loss can help me this year. If I do it inside the plan, the benefit stays inside. I cannot use it to lower this year’s taxes which is when I am trying to stack capital for more deals.

Common mistakes I see.
• Deferring taxes without asking what your future bracket will be.
• Locking up too much capital so you cannot join good deals when they show up.
• Listening to advice built for people who will retire on less than they make today.

A more thoughtful path for an investor in the one to ten million range looks like this. Take the company match if it is offered. Then start directing extra capital into assets that spin off cash flow and that you can control. Use the tax benefits now while you are building. Keep flexibility.