Comments on: Will you ever put a penny in your 401k again?

By: Pay yourself first or last?- 7million7years

Pay yourself first or last?- 7million7years — Mon, 01 Feb 2010 09:57:55 +0000

[...] Your 401k, potentially earning 8% plus the value of any employer matches (in an earlier post, we calculated this as providing another % point or two to your long term [...]

By: The 401k fallacy … « How to Make 7 Million in 7 Years™

The 401k fallacy … « How to Make 7 Million in 7 Years™ — Thu, 19 Mar 2009 07:07:17 +0000

[...] I covered the 401k in many posts, but I thought that I would pick up on a great discussion going on over at my other site, where [...]

By: Retirement Accounts: 7 Case Studies « How to Make 7 Million in 7 Years™

Retirement Accounts: 7 Case Studies « How to Make 7 Million in 7 Years™ — Wed, 11 Mar 2009 08:54:38 +0000

[...] If you are in a job, then it might be an easy decision: pull the trigger on maximum withdrawals from your salary and attract the generous employer match. Or, is it? [...]

By: Name one investment that is as secure paying off your mortgage « How to Make 7 Million in 7 Years™

Wed, 03 Sep 2008 13:47:30 +0000

[...] house price in the United States has risen by an average 6.23% per year”. I used 6% in my post comparing R/E to your [...]

By: 401k v Real-estate. A close call, then? « How to Make 7 Million in 7 Years™

401k v Real-estate. A close call, then? « How to Make 7 Million in 7 Years™ — Tue, 26 Aug 2008 08:36:29 +0000

[...] between the Mighty 401k and Humble Real-Estate. For those with a sharp eye, I posed the original post as a question, not a [...]

By: AJC

AJC — Sun, 10 Aug 2008 02:16:11 +0000

@ Jeff – There’s a question that you need to ask first: “what return MUST I get?”. Only after you answer that can you can “determine a return that is reasonable for each option, and then compare it to the associated risk before [you can sensibly] make a choice”.

By: Jeff

Jeff — Sat, 09 Aug 2008 20:57:18 +0000

@AJC
Looking forward to another post. I can see how some people couldn’t stomach the additional risk of Real Estate investing…and thus the decision to get a company match in a 401K is an easy (near automatic) choice. For me, I want to determine a return that is reasonable for each option, and then compare it to the associated risk before I make a choice.

By: AJC

AJC — Sat, 09 Aug 2008 20:04:56 +0000

@ Jeff – Aha! My point is proved (at least to you) … you shouldn’t just AUTOMATICALLY assume that the 401k + employer match is the bee’s knees right? You need to investigate ALL the likely options for YOU (which may, or may not) include real-estate ….

Worth another post, then? Stand by

By: Jeff

Jeff — Sat, 09 Aug 2008 19:20:01 +0000

AJC,

I appreciate your attempt at explaining why Real Estate investing should at least be considered over equity investing in an employer-matched 401K. I ran the numbers using your assumptions (adding in tax consequences–property and income–and cost of property insurance) and, although the annualized return was much closer, your Real Estate investing scenerios came out slightly ahead. I expected this result as investment property investing usually carries increased risk (and hand holding) and thus should provide increased reward.

In going through the process of comparing investment options, I was suprised by a few things. 1) the Real Estate investment option, according to your scernio, suffered from 8-15 years of undiscussed or accounted for negative cash flows after costs, such as property tax, insurance, mortgage payments, and your 25% unrealized income either due to maintenance or unoccupancy, and 2), more importantly, the overall outcome (equity v. real estate) varied drastically based on 2 assumptions: estimated appreciation of real estate over 30 years and estimated return in the equities market over 30 years. Even a 1% point swing in either of these assumptions made a huge difference in projected outcome, i.e., which investment option was better.

I looked through your blog (not exhaustively) for a post discussing your reasoning behind these 2 estimates, but failed to find one. Since it seems that the accuracy of these estimates (best and worst cases scenerios over 30 years) is essential in determining if either investment option has a clear advantage, I was hoping you could either point me to a post of yours discussing them, or let me know of any books, articles, etc, that led you to your estimates.

By: Is this what a transition to Money 201 should look like? « How to Make 7 Million in 7 Years™

Fri, 25 Jul 2008 16:15:17 +0000

[...] Do the math on the 401k + employer match against what you can achieve elsewhere. I have no problem with any answer that you come up [...]