Growing your 401k VS Liquidating it for Real Estate investment

What is most profitable.
The question is if you are having 401k you should liquidate it to start investing in real estate or not.

You heard from the older folks and some financial advisor to invest it. It would be the best decision according to them. On the other hand, the younger folks want to pursue early financial freedom and dubious of this advice. They may be right so.

The young folks think that they are in their 20s now and they pursue their financial freedom, there is more likely a chance that they will be financially strong at the age of 60. However, the amount you are having 401k doesn’t matter. As a young man I agree with the young folks but at the same time I totally want to take advice of the elders on.To figure out solution,I did an analysis which will give you a sense and you able to explore other options as well.

The first part of the article will give you the analysis: if you invest 401k at the age of 25 what would be your return. You will come across some better option to liquidate the 401k. So, do not take decision at first glance. To explore some other options stick to this article till end. I did this analysis just because I want self financially independent.


  • Age:25 years old
  • 401k Balance at Year 0:$15,000
  • 401k Return:7% assumes 401k is held in stocks, bonds, mutual funds, etc.
  • Income Tax Rate:30%
  • Capital Gains Tax Rate:15%
  • Withdrawal Penalty:10%
  • Annual Contribution to 401k:$3,000 pre-tax
  • Annual Contribution to Other Liquidated 401k Investments:$2,100 because you save 30% less after the assumed 30% tax
  • Tax Savings from Reducing Income by Contributing to 401k:invested and earning 7.0% annual

Final analysis.
At the age of 25, you are probably taking your first steps in your journey towards financial independence. Age 60 is likely to be very far away, so you are likely tempted to take that out now and use it to accelerate your journey towards financial independence.

If you invest 401k at the age of 25, you will receive at the age of 60 an amount of $489,545.35.


You can do your own calculations with the formula:

(Investment balance * tax rate) + w2 savings – tax paid on gains.

With this formula annual return would be 8.50000% at the investment of 401k.

Calculations would be (investment balance- annual contribution) * capital gains tax. For the rate of return 8.50000%

You have to keep in mind the assumptions I have mentioned above, at the age of 25 you invest 401k the annual return would be 8.50%.

Now it is time for 2nd opinion. Some other things to ponder including your reserves, as well as some other creative ways to enjoy high rate of return.

Best of both options.

In the above analysis, I assume that the amount of 401k is handled by a financial advisor. it is diversified amongst an excessive amount of mutual funds, index funds, bonds, stocks, etc. that will give a return of 7%. The analysis clearly suggests that despite of the tax-deferred earnings, there is a high chance that you can avail a better annual return on liquidation of 401k (8.50%+) by investing it on your own.

The other options for you would be to liquidate your 401k to a self-directed inter revenue agencies or a solo investment to take financial freedom. On these accounts you can almost invest in anything.Also, you can go with the real estate business. The best way to use your 401k is to go self-directed or take a loan against the funds and invest in real estate. This all depends upon your personal goals.