I am getting within sight of retirement and need to build a safety net post economic downturn. 

Then two weeks later I get a notification that a retiring landlord Jay Hinrichs wants to give away a free duplex to a young investor in the area, whom can rehab the property, post pictures online for others to learn, rent the property, and donate $50 /mo to charity.

What happens if that tanking economy happens when I was planning to retire?

These are all different means of deploying your retirement capital, with different constructs, types of service, etc - but with the same basic tax-sheltered foundation.Once you have the plan type identified, speak with a few quality providers of such plans and be sure to get client references.

Andy, Solo 401k plan is not for everyone (you must be self-employed or own a small business without full-time employees other than the business owner(s) and spouse), however if you qualify for it - in most cases it would be a much better choice for most people (you don't need a custodian with it, you don't need an LLC to gain the checkbook control, you can borrow from your plan up to $50K before retire, just to name a few advantages).

Or are you using Real Estate as a retirement plan?

I should be retired by now what the hell happened !!

Your more solid tenants want to be on the first floor, particularly in retirement areas like Marco.  

My original plan was to get rid of my retirement accounts (I have $35K in an IRA and 401K combined), take the early distribution penalty and use that to invest.

This is call passive income in which you now can have financial freedom. making around 10k-15k per month not having to work.In my opinion rehab make money but depend on how you use it to create your retirement portfolio.I hope this kinda give you an understanding about both side and answer your question.