Would you invest in 401k instead of invest in real estate?

[Roy C.]

Assuming you have a corporate job with employer matching 401k, would you save money for down payment for real estate investment or would you invest in 401k?

I understand this question can be answered differently depending on the situation. If a person wants to have a stable steady long term retirement plan for 30-40 yrs down the road, maybe maxing out 401k is a better choice. But if a person seeks early retirement and financial freedom, maybe saving up for down payment for REI might be a better decision.

The latter choice is probably appealing to most of you, since after all this is REI forum, but I would like to hear your input given the situation.

[Brandon Hall]

Roy C. Huy Nguyen

I disagree that if you invest in a 401k you are mentally preparing yourself to retire at 65. You are just telling yourself that you won't be able to access those funds until you are 65. That doesn't mean you have to retire at 65.

That thought process leads to leaving an employer match on the table, which I think is nuts. You need to take advantage of all financial tools available to you, and again this one is free money. I agree I wouldn't max it out, but at least get the match.

If putting 4% into a 401k cripples your investment strategy, you are doing something wrong.

One thing I haven't seen mentioned is vesting timelines. If your goal is to retire in a year but it takes five years to vest, then don't contribute to the 401k.