Reply to Cashing out 401K to payoff mortgage

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]You will be hit with a 10% penalty and income taxes. You can deduct against income taxes by buying points and closing costs. You will lose 10% but employer match and the fact you will be taxed more than that in the future and fund managers take up to 2% a year,  makes it not that big of a lost. The market hasn't really moved at all in the last 10 years and another dip would continue the cycle, especially with the recent predictions from OMB stating unemployment will be stagnant for 10 years http://www.politico.com/politico44/2012/07/omb-report-says-recession-will-cost-decade-of-high-130371.html . Rather than using 401k for retirement, another plan is to buy multiple properties, rent them out and pay them off by the time you retire. This is a good idea especially in our area where rents are high, jobs are good and people are flocking from the rest of the country to live here and need housing. Personally I have always advocated Real estate because it is like gold, a physical investment whereas stocks are theoretical. I want to be able to touch my investments.
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Seriously, how stupid are you?

1) While points are tax deductible, closing costs are not. That's just factually incorrect. Moreover, buying points for a deduction is outright stupid. Say they withdraw $100,000 and their basis is zero, the penalty is $10,000. Even if you buy $10,000 in points and are in the 25% bracket, you just spent $20,000 to save $2,500 in taxes. The hell?

2) Most people fall into a LOWER tax bracket when they retire than when they are in their prime working years (during which they are socking away money into a 401k.

Seriously, just stop talking.[/quote]

stupid? This is a common strategy among immigrants who do not trust the banking system and the stock market. Rather than investing through 401ks I have chosen to purchase multiple homes, rent them out and by the time I retire I will have both appreciation of physical property and rental income.

Many of us don't want to rely on pensions or the risk of external stock market fluctuations.

I still do use employer match but I am NOT counting on 401k to fund my retirement.[/quote]

Yikes.  This is all scary.  [/quote]

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