QUESTION 1) What would provide the greatest return?A) Investing $15,000 in 401(k) annually (the max. allowed)B) Purchasing relatively cheap real estate properties with ~20% down payments every 1-2 years and renting said properties out to cover mortgage payments and provide a small monthly profitC) Investing 6% in 401(k) to gain 50% company match AND investing in rental properties above every 2-3 years.QUESTION 2) If options A and B were the only choices, what would provide the greatest return?
If you are five to 7 years from retirement...you must take a well appear on the diversification of your whole portfolio. If you do not have a few bond price range to your 401k, IRA or taxable mutual price range...you will have to most likely start greenback price averaging into a few cheap bond price range. If you have already got a tight percent of your portfolio in bonds...and you've got a tight reserve of coins price range (reminiscent of laddered cd's or cash marketplace money owed)...then I'd opt for both the Vanguard S P 500 fund or the spyders (SPY) S P 500 fund. Rental estate is just too position pushed and leadership in depth for me to suggest....until you desire it for different motives except funding.
You don't tell us what % you are now contributing to 401K, so we have no idea what the difference is between 6% $15,000. Between the difference + the taxes (no longer pretax income) what amount of money would you have. Unless you are buying in a very low market, that doesn't sound like much to contribute to a down payment. Also, most investment property is requiring a 35% down, right now. Obviously that is a short term problems (1 year max?)
In general you can expect a greater return out of the real estate. There are mammoth tax advantages in real estate that do not exist for other investors. In other words the government is subsidizing real estate investments. Certainly, you would be wise to obtain the 50% match. That is found money. There is risk to real estate investing as all of those that bought the overpriced condos in Miami found out. Of course they lost just their equity. The banks were the ones that took the bath. I have a friend who has since passed away. He made enough investing in rental properties to retire to Miami Beach. He bought a house on the inlet side--a really nice house. His income from his regular job was just middle class income.
