Supplement your 401(K) with real estate

Supplement your 401(K) with real estate

The 401(K) account forms the backbone of most Americans’ retirement strategy, but it may not provide a large enough safety net for most people. Too few people actually participate in their organizations’ 401(K) plans, and those who do often lack the investment expertise necessary to truly capitalize on their savings.

These factors create a scenario where 401(K)s provide a false sense of security to people who will need a substantial nest egg for retirement. Luckily, it’s possible for workers to take control of their retirement strategy and build wealth for their future with diversified investments.

Consider diversifying through real estate. Single-family real estate investments are a great way to secure monthly income while owning a real asset. While real estate investing might be intimidating, HomeUnion® lets you maximize your retirement savings and get all the benefits of real estate without any of the work.

The 401(K) crisis

Retirement is expensive, but the vast majority of workers do not have the necessary savings to support themselves after they stop working. Medical expenses during retirement can be brutally high. Fidelity Investments reported people who retired in 2014 would spend an average of $220,000 on medical costs throughout their retirement, and that number generally increases annually. Unfortunately, most people lack the savings or income in retirement to handle this single expense.

A Employee Benefit Research Institute survey of 401(K) plans at the end of 2013 discovered the median value of a 401(K) account was just $18,433. The overall average account value of $72,383 is slightly rosier, but remains inadequate in the face of mounting retirement costs. While high net worth individuals are effectively saving for retirement using 401(K) plans, many other people are being left behind.

Too much choice

Many 401(K) plans provide investors a level of control over where their money is invested, and this has proven to be an issue. Unfortunately, the vast majority of people are not skilled investors. CNBC noted that multiple studies demonstrate people who are given control over their 401(K) investments are more likely to experience a retirement shortfall than people who have their assets managed by someone else.

This doesn’t mean that choice is inherently a bad thing, and it’s possible that moving money toward real estate investments could offer the consistent yields and insulation from stock market variability that builds a strong retirement safety net. Unfortunately, many people don’t realize the extent of their retirement savings options.

The benefits of real estate

Rental properties offer an appealing mix of consistent income and long-term value growth. People who do not understand the stock market may discover that single-family rental properties are a relatively easy way to build wealth over the long term.

Unlike stocks and bonds, real estate purchases can be leveraged using mortgages, which makes it possible for the real estate investor to purchase properties in several markets. Each of these properties will generate rental income in the short term, and the trend toward real estate appreciation will build worth over time. Because real estate investing favors a long-term approach, it is particularly well-suited to retirement savings.

Individuals who are over the age of 59.5 or have a 401(K) from a previous job could consider transferring the money in the 401(K) to a self-directed IRA. Money in a self-directed IRA can be used to invest in real estate directly, and this arrangement offers potential tax breaks.

How HomeUnion® helps

While it’s true that many people find investing intimidating or complicated, HomeUnion® makes real estate investing simple. Registration on HomeUnion®’s site provides investors with access to prevetted properties in excellent markets across the country. Purchasing a home is easy, thanks to a streamlined process. HomeUnion® provides access to a variety of in-house lending options, a well as property management, asset management, and portfolio management during the time investors own the property. To quickly diversify your investments and improve your standing for retirement, contact HomeUnion®.

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