Deaton Equity Partners

Investing in Real Estate vs. Relying on a 401k:
Two Drastically Different Retirement Outcomes

The American Dream. I remember each of my grandparents working for a time while I was a kid and then each retiring from companies after decades of employment with a retirement party, a gold watch and a healthy pension. General Dynamics. Braniff Airlines. F&M State Bank. My how work has changed since then!


That ‘normal’ path of going to college, landing a good job, keeping that for most of your working life, and retiring with a pension are artifacts in just a few remaining institutions. Today’s expectation is more like job-hopping to boost your salary and/or working in a gig economy where we’re 100% individually responsible for putting away savings SO THAT we can hopefully retire one day. 


As a result, many of us have old, partially funded, half-forgotten retirement accounts scattered throughout our trail of previous employers. 


If this sounds familiar and you haven’t already, I recommend decluttering the number of your retirement accounts ASAP by rolling each one over into a single, consolidated account.  And in doing so, there are some clever options I’ll reveal in a bit to give you more control, more flexibility and some juicy advantages in managing your money.

Red Rover, Red Rover, Please Roll Those Accounts Over!

You don’t want to be on the verge of retirement attempting to remember all the way back to your 20s and 30s as to who you worked for and what financial company managed that 401K, 403b, or IRA. Sifting through old email archives or trying to find quarterly statements…let alone passwords. What a disaster!

Trust me, while some of that is moderately fresh in your mind, you’re going to want to consolidate and rollover all your prior retirement accounts into a single, manageable account you can easily keep track of. 

It’s a beating, but if you do what it takes now – find all the accounts, see all the notaries, file all the paperwork – your future self (and your family) will thank you SO much. So suck it up and take action sooner rather than later!

Investing in Real Estate with Retirement Funds

Here’s where you get to the good stuff. Once you can see the value of your combined retirement accounts, their lackluster performance and all of those management fees, you will become interested in investment opportunities that have the potential to help you accelerate your earnings. 

Well, did you know you can use your retirement funds to invest in and enjoy the incredible wealth-building returns of real estate? 

Yup! You sure can!

There are certainly rules you need to follow in order to do this, but before we get to that, let’s walk through a couple of hypothetical scenarios to demonstrate why you might be interested in investing in real estate with your retirement savings. 

Hypothetical Scenario #1: Keep My Money Where It Is

First, assume you have $100,000 in your consolidated retirement account. And let’s say that over the next few decades, you earn an average of 7% in returns annually. You are able to add $10,000 per year to the account with compounding growth. In 30 years, when you reach retirement age, how much will you have…? 

$1.8 million

Not a bad deal. So, you’re thinking, I can handle that, right?

Well, let’s add inflation into the mix. Inflation is about 3.2% per year, which means the cost of living doubles every 22 years. 

So the $1.8 mil that sounds like big bank right now, equates to less than $900,000 in today’s money. Living out retirement on only $900,000 would be downright scary. 

Enter: The Self-Directed IRA

With a self-directed IRA, you have infinitely more control over the types of investments you’re allowed to make with your retirement money. No more being limited to just certain mutual funds, stocks, and bonds – although you can certainly invest in those if you want. 

Of course, there are limits – you can’t invest in a vacation home for yourself, for example. But you CAN invest in commercial real estate syndications. These are passive investments where you direct the custodian of your self-directed IRA account (which could be you) to invest the funds in a certain investment deal on your behalf. Any interest or profit earned from the syndication go right back into your retirement account and amplify your retirement savings. 

Hypothetical Scenario #2: Invest My Money In Real Estate Syndications

Now, let’s pretend that the same $100,000 was in a self-directed IRA account and invested in real estate syndications. Assume you invest in deals with a 5-year hold time and a 2x equity multiple, which means over the course of 5 years, your initial investment doubles (roughly 20% annual returns).

To be clear, that means in 5 years, your $100,000 investment yields $200,000 and over 30 years of similar returns, your self-directed IRA could value about $6.4 million

Additionally, don’t forget about the $10,000 in contributions each year, like in hypothetical scenario #1. Add those in and you’d have over $9.5 million at retirement. SHOW ME THE MONEY!!

*Side note: Being able to contribute $10,000 per year assumes that your employer’s 401k allows in-service rollovers. If that is not allowed, you may be limited to contributing $5,500 per year which makes the total in your account in 30 years around $7.4 million. Still not a bad deal at all. 

**Side note 2: There are many, many other ways to more fully utilize self-directed accounts. From catch-up contributions, to having an account for a business or side business, to other movements. So make sure you connect with a great advisor and/or provider that can maximize your exact situation.

In Summary

Comparing $9.4 million (or $7.4 million if your contributions were limited) to $1.8 million is a no-brainer. 

The impact on your future life and your kids’ future is nearly unimaginable, but add that to the impact your 30 years of real estate investments made on thousands of families whose apartments and communities you helped improve. That’s a truly exponential return on investment.

I’d choose real estate every time. (and I do!!!)

The thing is, for this math to work you can’t make this choice when you’re 65. This is a choice you have to make now. Even if you procrastinate another 5 years, you’re missing out on hundreds of thousands of dollars…potentially millions.

Do it for your future self, for your family, for your children. The short-term paperwork is worth the effort  to prevent your 70-year-old self and your loved ones from experiencing financial stress and strained relationships because of money, or a lack thereof. Learn the lingo, and do what it takes today so you can live life on your own terms when it matters most. 

If you’re interested in continued education, please visit our Resources page. I also encourage you to sign up for our Passive Income Investors Group to get more great content, actual deal results, live webinars, plus access to incredible deals (like the examples we just walked through) that you can invest in right alongside us.

We’re on a mission to return over $1 billion to investors while investing and improving communities of families. We’d love to help you build Passive Income, for life!

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