All Forum Posts by: Tom V.

Actually, that's exactly how it works.  You put $5k into a 401K and keep it in cash, your employer does the same, you have $10K.  You double your money.  

Also, 401K balances can be very misleading. Let's say you have $100,000 in your 401k. In reality (assuming you are eligible to withdrawal penalty free) only about $65,000 of that is yours. The rest belongs to Uncle Sam. Of course financial advisors will sell you on the whole "you can retire with $1,000,000, withdraw only $30,000 a year to live off of and avoid paying high taxes." But seriously, who wants to live like that? Not me."

Systematic 401K savings is the way the vast majority of American millionaires are created.   Who wants to live like that?  You mean retired with $1mm in liquid savings?  I would say a lot of people want to live like that.  

"And also, taxes have historically always gone up and so the Deferred tax benefit of a 401k may end up being a negative and another 20 or 30 years whenever retirement comes around."

Your statement is uninformed.  Tax policy has varied widely over the past 75-100 years.  

https://www.shmoop.com/taxes/federal-income-tax.ht...

"I was invested in all solid low-cost Vanguard funds and yet the returns were garbage." 

I don't believe that Vanguard low cost funds underperformed the market for any meaningful time.

"I also have an account with Vanguard with after-tax money so I figured it had to be the 401k provider. I get a 4% match if I contribute 5% or more of my pay so yes the money adds up quickly but like I said this is a benefit that ultimately comes out of the money my company would otherwise spend on my salary, it's not free money."

Unless you are running your own company, it IS free money - free to you.  That's the whole point of a match. 

"I prefer to have more control over my money. I am a saver and am consistently saving 20-25% of my pay in order to achieve my goal of investing in real estate. The tax benefits of doing that far outweigh the temporary benefit of the 401k so I'm taking the hit. If you have systems in place that deliver consistent cashflow I don't see why you need a 401k."

How many real estate investments have you made?  What is the most you have ever paid in taxes?

"Not sure if I can roll it over to an IRA, probably can but I'm not interested in equities at this time. I mean, I'm on BP lol."

There are lots of ways to get Bigger Pockets (have more money.  401k's just happen to be one of the best, easiest.  No real estate deal will get you 80% instantaneously with 0 risk, which is what a 4% match on a 5% contribution does.  Up to you, but I would take the free money.  

it's interesting to me that so many people think the 401k is still viable. I could see a solo-401k or self-directed IRA being profitable, but by and large the 401k doesn't work anymore, simply because of the sheer numbers of people that are doing it. Large, above average profits are possible in a fund at first, but as a fund gets too big and buys up all the good stock or bonds, naturally the fund becomes either overinvested in one niche, or has to take the excess money and apply it into other stocks that aren't as profitable. Thus, the bigger the fund, or the bigger the amount of money placed in a fund, the faster the fund's returns regress to the norm. Warren Buffett cited this as the reason he closed his investment fund. With Real Estate, the opposite is true, the larger the scale, the bigger the profit potential. Thus, the 401k is dead, as is any stock market fund in general at this point.