(1888PressRelease)
July 26, 2007 - People with a 401K are always asking whether they should continue to make contributions when their rate of growth is usually very small if at all. Many 401K programs actually lose money over time but fortunately there are some that don't. I like to give people an honest answer based upon my many years experience handling pension money for my clients. To give an honest answer, I have to ask questions in order to know how their 401K money is performing. I try to determine the average rate of return but that can be hard without knowing how much was contributed and when. Usually, I use the best available information which is the latest end of the year statement. Rarely do I find a retirement fund worth contributing to and that includes 401K's et. al.
The client usually explains the most compelling reason for continuing is the employer contribution which sometimes equals their own. For example the employee puts in $1,000 and the employer matches it. Good so far but that matching contribution comes with a price. You may not get it at all if you leave the company too soon. Or, you may not borrow against it or take a withdrawal for a designated period of time. There's a variety of reasons why the matching contribution may not have a big impact on your retirement account because of the restrictions.
So, let's compare your 401K with 100% matching funds from your employer to a simple Investment Real Estate purchase with 10% down and 90% financing. In the real estate purchase you get matching funds amounting to 900% of your contribution which is better than your employers 100% matching contribution. As an example, you buy a piece of income property for $100,000 and put a $10,000 down payment. The balance of the purchase price comes from a lender who puts the other $90,000. That's 900% better than your 401K and you get 100% of the benefits of owning the property immediately. The only condition is that you must repay the 90% loan. You get 100% of the tax write off, 100% of the appreciation, 100% of the rent less expenses and 100% of the depreciation.
You can sell when you want or keep the property forever and let the tenants pay off your loan. So, I ask you, given the choice of getting matching funds on your 401K with the restrictions that go with it vs. putting 10% down and getting 100% of the benefits with only one restriction (you must repay the loan) which is the better choice?
But what about the tax write-off you ask? You can deduct the contribution to your 401K but you can only deduct the amount of your contribution. In real estate, you get 100% of the benefits and 100% of the depreciation even though you only invested 10% of the purchase price. So you are actually receiving more tax benefits if you make NO contribution to a retirement account and invest your retirement money in investment real estate instead. If you invest in a growth area of the country, you will actually out perform the best performing retirement accounts by more than 3 to 1. When we go through the numbers and stick to the facts (and forget about the minor tax benefits available for a modest retirement account contribution) most people decide for themselves that further contributions to a retirement account is the worst choice they can make. The system is truly broken and no amount of contribution will fix it. Buying and owning real estate is the best way to prepare for retirement. And the best website for locating the highest yielding investment property is http://www.TenPercentDown.com.
The conclusion about your 401K is the same of you have an IRA, Keogh, Sep IRA or Roth IRA. Despite the remote possibility that you might make money in your Roth and be able to defer those gains, I can’t imagine anyone thinking that a Roth IRA is worth considering for even a moment of your time. The retirement system in the US is broken and offers false assurances that somehow they will perform better in the future than they’ve done in the past. For most Americans, the realization that their retirement account system will not provide retirement security is realized when they retire but then it’s too late.
That leaves Social Security but everyone knows by now that that is nothing more than grocery money. So, what do you invest in to improve your yield and provide growth and financial security when you retire. Investment Real Estate is the number one way and done properly with the assistance of experienced professionals will out perform any investments offered by Securities Firms, Commodities Firms, Banks and Insurance Companies. Since 85% of the wealth of this country is represented by Real Estate holdings and the tax benefits are greater that any retirement account, the decision to retire with dignity is a personal one. However, the facts are in and real estate is the best way to invest for retirement.
For further guidelines go to http://www.TenPercentDown.com and register.
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