Should I Stop My 401k Contributions?

Question

I'm changing jobs so figured this might be a good time ask this. My previous and next employer do a 401k with a 6% match. I guess 401k's the only benefit of a 401k is it's tax benefit and I'm making an instant 100% ROI with the match... but the issue I have is that my money is tied up for the next 40ish years (I'm 28).

I'd really like to be able to have that money more accessible to put into real estate and other assets. The way I see it, we're acquiring real estate which has great tax benefits from depreciation, 1031 exchange and maybe other benefits I'm not aware of. The other positive is cash flow, appreciation, leverage and debt paydown.

Outside of my real estate, I still have an IRA and a regular stock brokerage so I have some exposure to the stock market. Should I stop contributing the 401k? Hoping to drum up a good conversation here.

Tucker Cummings · Answer

Account Closed I hear you on the retirement... but I've bought 9 houses in 18 months that allows me to retire at 28, if I so choose. Meaning my rental cash flow is greater than my living expenses. I have more ambition though, so I'm continuing to work to make further investments. I suppose that's what I mean when I say I want access to the capital now, because I can invest in a way that produces now with cash flow and appreciation and even more later by using leverage, 1031 exchanges, depreciation, etc.

As for sitting at home and not working... I hope I didn't give the impression that's what I'm doing but I think I know what you're getting at (welfare state, UBI, stimulus checks, etc.). I don't agree with that either and I'm often disgraced this is the generation I'm associated with.

Account Closed · Answer

My 401K contributions allowed me to retire at 55 but when I started working at 21 we got bonuses to work our butts off, we didn't get bonuses to sit at home and not work. Times have changed a lot since 1982...... You should definitely contribute up to the employer match though.

Al Hernandez · Answer

@Tucker Cumming

If you put the money in retirement account you will not see any income from this until you reach retirement age.

If you buy cash flowing investment properties you receive the immediate benefit of a stream of rental income.

You are also building equity in the properties due to appreciation, while tenants pay down the loan. Plus all the tax benefits.

Timothy Boyd · Answer

Hey @Tucker Cummings.  I am no expert, but have thought on this topic before.  Can't talk myself into giving up the free money the employer is putting in for the 401k match, so I continue to contribute to mine at the level that gets the maximum employer contribution.  Good luck!

Account Closed · Answer

@Tucker Cummings Absolutely did not get that impression about you! And it's not just your generation, it's all of our generations. Definitely take the match though. It's free money. I was able to control where my funds were distributed in my 401K and I did very well with it in my career.

Sattir Bitti · Answer

Contribute up to the match with your eyes closed. Beyond that its up to you. IMHO maximize 401k (preferably roth) and anything after that save for down payment and leverage by investing in real estate.

Alecia Loveless · Answer

@Tucker Cummings My employer had a 5 year vesting period starting the second year and 25% each year following. I didn’t really know what my future held at the time but the job is only 3 minutes from home and I could easily walk or bike if I wanted and there’s plenty of room for overtime if I feel like it.

I put enough in to get my match and while I haven’t always felt like the return has been great due to the wacky options they have for stocks and funds for us to choose from I do now have a nice amount set aside 7 years later.

I figure it probably won’t ever really be enough to get a great draw on once I retire, and my current plan is to roll it over and purchase real estate with it later on for cash flow. However, the job is convenient and I like it ok so who knows, some day it might be big enough to keep.

Mason Hickman · Answer

@Tucker Cummings

I would contribute up to the match and take the instant returns, assuming it isn’t some crazy vesting period.

Should I Stop My 401k Contributions?

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