Pause my 401K and channel to real estate? Stop it all together?

[Dan Hinkley]

I currently receive a 50% employer match up to 6%. I'm 42 years old. I have successfully flipped a few homes years back but needed to stop with a new family and loss of employment. I took a new job 3 years ago but needed to relocate. I accepted a bond for deed deal on my home which will close within a few months. During this time I have been renting myself. With my money from the sale of my home I plan to purchase a primary residence and an investment property. This may be challenging... However if paused my 401K and added the 6% into my savings, it would be easier/quicker. My goal is to acquire enough investments/flips to stop 9-5 and keep cash flow coming in with investments and a flexible PT job within the next 8 years. We live modestly so I know it's obtainable. When I quit my day job, until I'm 59 whatever money I take from 401K will be penalized 10%. Also if I take a larger amount I will be in a higher tax bracket. However I do realize 50% return is awesome too! With my goals, doesthe 401K still make sense? If so, do you think pausing it until I get my real estate investment plan off the ground and moving forward makes sense?  [/url]

[Edward B.]

@Dan Hinkley, there are a lot of varying opinions on what you are proposing. The die hard "real estate is the only way to achieve your dreams" crowd would probably tell you to forego the 401k and pin all your hopes on real estate. I am pretty big on diversification myself.

It is very hard to beat an employee match. Furthermore, when it comes to investing in tax advantaged accounts you are very limited as to what you can put in there. And you can never make it up if you forego it. I always recommend that people max their retirement accounts first, especially if you are getting a match. Taxes will eat you up so the more you can do in a tax advantaged account, the better. When you transition from your current job you can look into rolling that 401k into a SD IRA or similar vehicle and really take advantage of the tax benefits. As you get deeper into this game you will learn all kinds of neat stuff that you can do with your 401k or IRA to advance your investing. What you will never be able to do is make up contributions that you passed up.