Hi,
I like furnished owner and campbell simon as both are very intelligent, experienced and smart guys.
But the truth of the matter is “What is a 401k retirement account”? And “How is that account managed and invested”?
Well a 401k is a tax qualified defined contribution pension plan account and this account is managed for a fee currently averaging more than 0.78% or a little over 3/4 of 1% per year. Now keep in mind that choosing a mutual fund to invest all or part of your 401k into also has additional fee’s and cost’s known as “Front End Load, Back End Load, Deferred Sales Charge or Redemption Fee’s” or the potential of 12b-1 fees.
These charges add additional cost’s (Load) to the cost of your 401k every year. These cost’s could be as much as a 1.5% fee in aggregate to your account, in an account where 401k’s generally yield a 7% average return per year this 1.5% cost reflects a life time aggregate loss of returns as high as 28% compounded over a potential 50 year period.
Now the fact that 401k’s are primarily limited to only investing in Mutual Funds, Collective Investment Funds, Variable Annuities and Pool Guarantee Investment Contracts in which all of these funds depend highly on the economy and the stock market.
Now the stock market lately has been a very volatile platform, in fact I predict that there will be a taking of profits by investors in the near term future capturing profit gains reflected over the last few years. I am not the only investor who sees a potential profit taking sometime in the next few years that will reset the value basis of the markets.
Industry analysts predict a large market correction which could be 20 or 30% of current market values, it is why big investors like Warren Buffet have been reducing their stock exposure going to cash!
With that said SDIRA investments made into a diversified portfolio of precious metals (10%) with REIT shares, Trust Deed Notes and all Cash property investments can provide a better yield and income than the adjusted (For Cost’s) 5.5% yield on 401k returns. In fact that diversified portfolio can yield in the 8 to 13% range of annual returns.
No you can not be stupid or greedy about your investments and always want to keep some prudent reserve of cash within your SDIRA however with a little research and diligence you can protect your retirement nest egg while investing in less volatile markets.
But the truth be told there are hundreds of thousands of investors who have converted their 401k into a SDIRA and are investing in alternative investments with less risk and less market volatility.
This is in fact a fairly low risk area of investment as real property, trust deed notes and REIT’s are secured by real estate and precious metals kept in a hosted account as hard assets has the same secured effect. Now timing is important however once in leave it in as all of these types of investments have historically done better over time.
If the stock market readjusts by just 20% it will take about 5 years to recover just the 401k account balance before market adjustment by the time you average yearly return and adjust for cost’s.
I don’t feel I should tell any man what to do, I can only share my experiences and expertise and the rest is up to you, for the good, the bad or the indifferent.
Now I absolutely agree your dad can buy a duplex, triplex or four unit and work to rehab and improve it over time by buying on a FHA or VA loan with very little down.
Good Luck,
GR
