Cashing out 401k to invest in RE

[Daniel Thomas]

Has anyone cashed out their 401k to try and get a greater return on their money and use the proceeds to invest in RE? I have contemplated doing this.

[Greg B.]

Yes I did do this in 2005 and never looked back. Cashing out is not for everyone and I would not do it if you don't have a viable plan.

Here is my argument about the 401k thing.... A 401k is a tax DEFERRED entity. You will pay income tax on the money at some point in time. The pitch was that you would be in a lower tax bracket upon retirement. Maybe, maybe not, but you will still pay income taxes on the money eventually. So the argument about paying the income taxes is a non issue for me.

The other part of the argument is the penalty, 10%. Agreed, it is a penalty, but it is surmountable.

My thing is, I put MY money into an account to defer MY income. The money is supposed to grow for decades. The actual growth will depend on your choice of investments. You may even break even over the decades or LOSE money. However, the managers that promote the investments(including fund managers) ALWAYS make money. Even in 2001, when my 401k funds lost 40% of value my fund manager was making money and never even picked the phone up to warn me that I need to make some adjustments.

The fund manager that you pay for is not looking out for your interests. Your finances are not something you can give to someone else to trust to manage. That was a tough lesson for me.

Now, while you are putting you income into the 401k for decades with the possibility that it may lose value, the 401k is NOT putting money into your pocket each month. You will not enhance your standard of living from a 401k.

What if I took that same money and put it into something that could pay me now AND pay me later? Hmm. It was a no brainer to me. I paid the penalty and income taxes and invested into income producing property.

Here's another point... Yes, my real estate investments may lose money occasionally. It could happen. However, I don't have to pay someone else to lose my money if it happens. I can take full responsibility and not have to rely on someone else to try and sell me something that will only benefit them.

Real estate investing has been a great choice for me.

Your mileage may vary.