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401K Verses Other Passive Income

Started by saver73, November 03, 2018, 06:00:34 PM

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We are going through our budget now and trying to figure out what would be the best allocation of our savings. We have a mortgage at 3.75% and we are allocating 10% of our income to 401K. If we use the FS-Dair method we would pay 37.5 % of our savings to pay down the mortgage debt and try to maximize our 401K. We are wondering if it makes sense to allocate some of that money that we might put into 401K elsewhere such as RealtyShares or buying a rental. We would like to create another dimension of passive income and would not be able to do so if we maximized our 401K. What are your thoughts or suggestions?

Jon Sharpe

The impact of taxes on your savings over time is so dramatic, that I always recommend maxing out all tax advantaged accounts before worrying about after-tax investments. This does two things. First, it maximizes the money you keep, e.g. savings rate. And it simplifies your life for a few more years while you stretch to max out every tax advantaged account.

Once those accounts are maxed, I would start to look at investing in passive income sources.

Obviously, just my opinion, but that's the approach I've been taking and it's working well.