401k liquidation considerations

[Carter J.]

Hi all :) I'm considering liquidating my 401k to buy rental properties. I currently have 4 and they're cash flowing quite well.

I've been reviewing a few discussions here on BP that discuss the benefits and disadvantages of withdrawing money from a 401k, using self-directed 401ks, matching/not matching employer 401k contributions, and a whole bunch of other options. All sides appear to have great points.

The thing that is nagging me while I'm reading them all is this: 401ks/Roth IRAs/whatever fancy retirement savings plan all force you to retire at a particular age: 59.5, and if I understand the implication here: you can't use any of the money until you're that old. Yes, you can use it to reinvest it into whatever retirement plan you have, but the moment you take any of that money out to go buy dinner, you get penalized. If I understand correctly, you can't actually do anything with it to improve your life before the age of 59.5.

Maybe it's just me, but I'd rather retire way before that. I love my job, but I love my family more. I'd rather spend time with them than work. Let's say I get my rentals cash flowing to an amount that pays my living expenses plus whatever extra I would want for luxuries/vacations/whatever. Simply put, let's say I get all the cash flow I need to live a comfortable life (and cover rising health costs/cost of living increases/whatever). Assume it's just raining money from all the rentals.

If I'm able to do that by 40 or 50, why would I bother contributing anything to a retirement account that I have to wait to utilize? It's great that name-your-favorite-retirement-approach can save you all this money with tax advantages, but I genuinely don't see the benefit if I have to wait to use money I won't need. If I have what I need/want way before 59.5, then all the tax savings in the world don't appear to actually provide anything of value to me.

Is there something I'm missing?