Real Estate Vs. Investing in 401k
401k plans are special accounts that help people save for retirement. Real estate refers to land and buildings in which people may invest.
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Eligibility
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Anyone can invest in real estate. You can only contribute to a 401k plan if your employer offers it.
Time Frame
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The IRS sets annual limits for how much you can contribute to a 401k plan each year. If you do not put in the maximum amount in one year, you cannot invest extra the next year. There is no limit on how much you can contribute to real estate investments.
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Tax Breaks
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Contributions to a 401k plan result in a tax deduction. There is no tax deduction for investing in real estate. However, if you are contemplating paying down your mortgage, you should remember that you may be allowed to deduct the interest that you pay on your mortgage from your taxes.
Considerations
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You cannot withdraw money from a 401k plan until you are either 59½ or leave your job after age 55 without paying a 10 percent penalty. You can sell your real estate investment penalty-free at any time.
Types
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Employers can offer a variety of 401k account investment options, including mutual funds, stocks and money market accounts. Real estate investments can include houses, apartment complexes, retail buildings and other commercial developments.
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