Forfeit my 401K benefits to invest in RE ?

[Michael D.]

Hi everyone,

I need some advice moving forward (yes I understand you're not a financial adviser)

I have great 401K benefits through my employer they'll match up to 50% of whatever I contribute and vesting is immediate.
i.e. I contribute 18K they add 9K, which is what I'm currently contributing, this is a new rule since 2016 (previously it was 50% up to 6% like other companies).

Obviously this is a tremendous benefit which I'd like to keep using, but I feel I can put that money to better use as a down payment on a sfh/2-4 plex/etc..

I've been in contact with the broker that manages the 401K and I've asked;
1. Can I roll over my current 401K into an IRA while I still work for the company?
=> No, not allowed.
2. Is there some form of self direct method that I can use with my 401K?
=> Yes, via brokerage link. But investing is only allowed in stock market securities, not Real estate.
3. What other options do I have to invest in real estate?
=> You can take a loan out on the 401K, max amount able to lend is 45% of your 401K

What would you advise me to do? I understand that having a diverse portfolio is key but maxing out my 401K does chop into the amount of cash that I can save each month for a down payment.

Thanks in advance!
Michael

[Roy Oliphant]

@Michael D.

I am not a CPA and you need specific tax advice regarding this.  However, if you put the max in (18K) wait for the match (9K) and then borrow 12K (27K*45%), you have 2/3 of your money for RE investment, you are leveraging the 401K return to 150% of your investment (9K match on net 6K Investment) and you have enough from the match to cover taxes and penalties if you cant pay the loan back when your RE investments are paying so much money you don't have to work anymore (LOL!!!)

Seriously, a guaranteed 50% return on your investment in the first year for doing nothing but saving the money? Plus don't forget the tax deferral on that income that you would have to pay if you don't do the 401k. I don't know how you risk that for the joys of RE investing. Build the 401K and convert it to an IRA when you change jobs in a few years.

Just one man's opinion.