Real Estate Investing vs 401K
The first thing which comes to our mind when we think about investments is an easy and happy future. Any kind of investments be it in real estate, various retirement plans or stocks are only made to save for the rainy days or days after our retirement. What most of us usually fail to calculate and assess is what will happen after a couple of years, what will be the inflation rates, what will be the tax slabs, what will be the future trends. While a lot of plans yield the fruits are longer periods of times, there could be options which keep giving us regular returns. It is totally a personal choice to make.
Let us talk about 401k first. Almost 99.9% of us think about our future, what will happen once we retire. In fact, most of us actually function and work with just one mindset which is saving for the times after our retirement. One of the most famous tax benefit Investing plans is the 401k. This is basically a retirement plan which the employers provide to its employees. In layman’s language, it is a particular amount of money which we save from our pre-taxed salary for our days after the retirement. The most important 401k benefit is the tax advantages which we get. This tax benefit investment plan, actually helps us to lower the amount of taxable income since the income which goes into this plan is exempted from any tax plans. However, along with this benefit, the con is that you cannot withdraw from this plan before the time specified by you and if at all you decide to do so, there is a certain percentage which is deducted as penalty. While a lot of employees choose to deposit in this plan, there are also people who are not eligible to be a part of this employer given investment plan. In that case, these people have their own options to pick up a retirement plan and invest in it. Real Estate investment, on the other hand, is a plan where anybody can invest, irrespective of the fact whether you are working or not, there is basically no eligibility criteria. Also unlike investing in 401k, real estate does not have a maturity period. You can put it up on rent or sell it at higher rates whenever you get the best deal. Even if we include other cash flows and extra costs of repair and maintenance real estate still looks like a better deal, mostly because of the nature of investment that it is.
While it is a personal choice to pick real state or 401k, the best idea is to have multiple investment plans. It is never correct to stick to just one plan at any given point in time. All these tax benefit investment plans have their own pros and cons, it is completely an individual choice to pick one. But if your employer also puts in his share of money in your 401k plan, never say no. Because not just it is an increase in your saving but also the share which your employer puts in is not counted as your annual income and hence it is a win-win situation.