Do you utilize traditional retirement investments?

Question

I searched through the forums, and found a lot of people asking about liquidating 401k/IRA etc. But I could not find anything about whether or not BP members even put money into traditional retirement investments.  So, do you utilize traditional retirement vehicles, or are you planning on straight REI income in retirement? Ideally from this post I would like to start a discussion about why or why not BP members use traditional investments. Thank You everyone in advance!

Ryan Allen · Answer

@Andrew Carlson

Yes - I am managing my investments based on my goals.

First, I put money into a 401(k) (it is a Roth), to get the immediate return from the company match.

I’m maxing out my Roth IRA. I’m looking at my income and tax brackets to determine whether I should contribute to traditional or Roth as the year progresses.

I am also saving money to invest in real estate. Lately as I have had enough cash and don’t see myself acquiring another property in the near future, I’ve been increasing my 401(k) contributions. I have a high savings ratio which allows me to pursue my current strategy. In addition, I want to try to take advantage of the tax-advantaged accounts to help me limit my tax liability.

Jaysen Medhurst · Answer

@Andrew Carlson, I max my employer's 401k program. Since they match up to 5%, I'd be throwing money away by not participating. I also have a lot of control over the account, which is key.

529s for the kiddos. This is especially nice since grandparents, aunts & uncles, whoever can contribute.

Michael Morton · Answer

I have invested in corporate 401ks and have rollover IRAs..  After years of wanting to do REI, I finally really got over my fears and started learning about REI in books and mostly here on BP. I am going Pro tonight after my 3rd webinar. My mindset has changed so radically since joining here. I am probably going to use my 401K for a down payment. Looking at Multifamily (buy and hold), where I initially thought SFH was the way. I realized my money would be better spent in real estate then with the govt/fed and their ups and downs, which I have no control.

Pat L. · Answer

We have avoided traditional tax deferral/investing all our lives. I did work a few years before retiring into the 'you're going to lose it all' REI game. So we dumped a LOT into 401(k)-solo's for the proverbial tax deferral & it's ONLY invested in REI. I've watched family members play the equities game over the last 30+ years & we are WAY WAY ahead of anything they have ever achieved.

One of my BIL's has always played the 4-5% reinvested dividend game praying the underlying equities don't lose any value. Meanwhile we have achieved 12-30% p.a. depending on the type of property, how we structure it & of course the initial cost. Both my BIL's have worked in great jobs, tell us they made a lot of money, yet both their wives are still working & they say they aren't going to retire until they are 70 ???

Scott Jensen · Answer

@Andrew Carlson I think you are combining two separate things: 1. tax advantaged retirement accounts and 2. investing in publicly traded securities (stocks, bonds, mutual funds, ETFs, etc).  You can use tax advantaged retirement accounts for buying publicly traded securities or for buying privately held real estate and there's pro's and cons of each.

Everyone is different but, from what I can tell, most real estate investors have some money in publicly traded securities but the bulk of their wealth in real estate. A lot of real estate investors have money in retirement accounts through their employer since an employer match is pretty hard to give up.

My mix is generally about 50% real estate equity and 50% stocks. Right now my numbers are off because I am hoarding cash as my income is not stable. As far as retirement accounts I max fund our Roth IRAs and put a small amount into 529s because my state gives an additional tax break.  None of my real estate is owned by my retirement accounts but that will probably change over the next few years.

Max T. · Answer

Yes I do.

My first teaching job required contributions into the state's pension fund. I paid into that for 9 years and I still let it ride. I'll be penalized for early withdraw.

My second teaching job utilizes a private plan that comes with a 5% employer match. I'm going on 3 years with that.

I also have a private IRA and 529 plan through Vanguard. I don't max that out but probably should.

Bjorn Ahlblad · Answer

@Andrew Carlson I retired a few years ago. The bulk of my retirement income is rentals. Ya, I have funds too; but they are not competitive and don't keep up with returns from REI.

Andrew Carlson · Answer

It sounds like employer matches are one of the best reasons to contribute to those accounts. Being a travel nurse I do not have any employer match options, but I do make good cash, so my retirement investments are really up to me. Thank you for the input everyone! @Bjorn Ahlblad, @Scott Jensen, @Max T., @Jaysen Medhurst

Do you utilize traditional retirement investments?

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