Cash Out retirement fund!! Is it stupid for me??

[Chris C.]

This flies in the face of everything that we have ever learned about retirement accounts.  So I want to start this by stating that it is stupid for 99% of the people out there to cash out retirement accounts but I would like feedback on my situation.

Brief update on my situation:

1. I plan on retiring from my full time job in June of 2020/ Cash Flow will be very important
2. I am 44 years old
3. I will be living off my rental, fix and flip income, and other real estate related activities
4. My company is freezing our pensions effective June 30th 2019.  We have the option of rolling over this pension or cashing it out.

My thought is to cash out my 401k and pension and payoff as much real estate related financing as I can with the funds left after taxes and penalties.  This will accomplish the following.

1. Increase monthly cash flow by $1800
2. After paying 10% penalty I will save $4400 over what I would pay in interest in 2 years / In other words, interest savings more than pay the penalty
3. In my opinion the taxes are a wash as I would have to pay those now or when I retire.

There you go,  please poke holes in this plan and tell me what I am not considering.

[Michael Jones]

I am sure there are folks on here that will roast me for what I am about to say and tell me it was a mistake but a person armed with experience is not at the mercy of a person armed with an opinion in a debate.

I cashed out my 401k and took a total of 30% hit when I did it. Remember that you will pay the 10% penalty, taxes when you cash out and also will have to show the cash out as income when you file taxes. It will be over a 30% hit easily.

That was in April of 2015 and it is now April of 2019. That is four years when i count it on my left hand or my right hand.

I cashed out for one reason. I wanted to use the funds to buy rental property. 

I used the remainign two/thirds that was left of my 401k and begin to purchase four plex apartments.

They were affordable and I could gain a residential loan on them with a 30 year fixed.

I only had enough for the down payment for two of these buildings when I first cashed out.

Now I own 6 buildings and 28 units. Four years later.

My annual profit on these 28 units (Profit being what I get to keep after all bills, mortgages, taxes, repairs....everything is paid) is greater than the total amount that I had in my 401 k before I took the penalty.

Yes, that is correct. 20 years of saving into a 401k and four years later i make more per year than I had accumulated in my total 401k.

But here is the catch, if you are good at property management and buying the right properties to make a profit it will be a good decision. If you suck at buying the right properties, can not deal with people or being successful at collecting rents, placing the right tenants into the property etc..... you will cash out and just waist your money away just like investing in Enron or any other bad investment.