To 401K or Not to 401K

[Keith Schuster]

I'm new to real estate investing and have been thinking about it for what seems like an eternity. I've been spending a lot of time thinking about retirement. Frankly, I'm not optimistic about whether my 401k/IRA's are going to be enough when I decide to retire - I guess thats part of the issue - I may never get to retire... I'm looking at real estate as a possible enhancement to my retirement plan. The way I'm looking at it, cash flow from RE is the way to go. Seems to me regardless of what the stock market does(look at last week) real estate is always going to provide cash flow for me. The more I look at it the more I think retirement accounts are a waste of time - I ought to be putting my money in real estate and building a reliable cash flow that can carry me through retirement.

I'm wondering if I should stop contributing to my 401K and use those funds for REI... I've got about 300K in an IRA - maybe I use those funds as well... I guess I'm looking for your thoughts on this. Any thoughts - anyone thinking/ doing something similar?

Thanks

Keith

[Carl Fischer]

@Keith Schuster

Many people experience your same concerns about retirement. More control will alleviate some fears borne of using "Hope" as a strategy. I assume your level of experience in real estate is minimal. If you take your money out of your retirement accounts prior to reaching eligible distribution age you will be subject to a 10% penalty. Don't do it until you, at least, investigate self directing IRAs/401ks. 

I personally love to do real estate in tax deferred/free accounts. I would suggest you look at self direction of your retirement accounts. This gives you the best of all worlds. Educate yourself on self direction --most administrators have a lot info on their websites for free. 

I do have to let you know that I am a third generation real estate investor and also a founder of CamaPlan a self directed IRA company. Be aware that Real estate can have increases and decreases, a lot like the stock market. It also is more work than stocks in my opinion. However, It is nice when a tenant stays for ten years and pays off your mortgage. It is not so fun when a tenant moved out yearly or earlier. One of my favorite things is to receive rental income when I am on vacation. Real estate rentals are also a hedge against inflation. I think you can see my point--Make sure you understand the pros and cons of each deal you do. Good luck -I believe you are on the right path --let me know if I can help in any way.