A 401 cabin or condo may be better. In this episode, I'm going to answer the question,
"Should I invest in a 401(k) or buy a vacation home?"
You're going to be surprised with my answer. You can have your cake and eat it too.
So, my name is Doug Andrew and I've helped many, many people for now more than 4 and a half decades
prepare for their dream retirement which ofttimes in their minds when I say, "What would you like
in retirement?" And many people say, "Ooh, we'd love to have that dream cabin or vacation condo
that we can spend time in during our golden years." And I go, "Why don't you
have that right now?" -"Because we're busy socking away money saving for retirement and our 401(k)s
at work so that we'll have the wherewithal to be able to buy the cabin or condo vacation
home later on." And I'm going, "Let me show you something that you're probably not even aware of
and you could be enjoying a cabin or condo with your children, not just your grandkids,
all through your earning years. And then during your retirement, you'll have all these memories
and you'll come out probably better than putting money in the 401(k).
And then later on taking that money paying tax on it to buy a cabin or a condo."
People just don't think about the impact of taxes, appreciation, and what the real goal is. So,
let me further explain the dilemma that people face when they're thinking, "Golly,
should I just sock away every bit of money I can into a 401(k) so that at retirement, I'll have
enough money to finally buy this dream cabin or condo vacation home that we've always wanted?" Or
"Golly, would you like to be enjoying a vacation home now?" What is the best thing to do?
Now, most people would say, "Oh, no. You have to sacrifice. You're gonna have to
put off those dreams and save." Save, save, save! And then you'll have enough money to
get those things later in life. Well, I'm a big one for smelling the roses along the way. You can
have your cake and eat it too. So, when we talk about this dilemma, oftimes, people think, "Well,
I'm going to save the maximum amount I can into my 401(k). Because I would have to save $1,000
less a month to be able to service a mortgage payment on a cabin or a condo because I don't
have the money to pay cash for that." So, I'd be forced to finance it. And now, I'm going into debt
for a vacation home. I'm going, "Uh, you don't understand how real estate works and how investing
works." And so, I begin to show them how they can get the same basic tax benefits by taking out a
mortgage to own a cabin or a condo. Be buying it through the use of a mortgage because it's going
to appreciate in value. And it's probably going to appreciate as good or better than a 401(k) grows.
And you get the same type of a tax deduction that an IRA, 401(k) does. And at the end of the day,
I'm going to show you what would be far better in my opinion than taking out a bunch of
money out of your 401(k) at age 60 or 65 and being clobbered with taxes. And you go, "Wow,
I only have this much after-tax. And now the cabinet/condo I could have bought for 200,000
years ago is going to cost me 800,000. This didn't make sense." Yep. So, if this is intriguing you
already and you're thinking about somebody who ought to view this, share the video. Subscribe.
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I don't want you to miss out. And here's a sneak preview of a free gift at the end of this episode
that I want to make sure you get which is a 300-page book with all kinds of charts graphs
and explanations. But as we continue with this concept, many times I have helped people establish
what I call a 401 cabin or a 401 condo. Now, is there a section of the internal revenue code that
is called a 401 Cabin? No. I'm just using the term from 401(k) to say, "You know what?" Maybe
your goal that you've stated Jim and Mary Jones of having enough money in your 401(k) to finally
at the end of the day in retirement to have enough money to buy your vacation home is something that
you could actually be smarter to buy now even if you don't have the money. A 401 cabin or an IRA,
individual retirement abode, okay? I have a cabin and I've owned it for more than 20 years.
And in a nutshell, we bought this cabin with 20 acres back in the day for 100,000 bucks. Now,
people look at that now and they go, "Wait a minute. You only paid $100,000 for this?"
Yep, it has doubled at least twice, okay? Doubled from 100,000 to 200,000. 200,000
to 400,000. It's worth more than that now. But let's just take the snapshot in time. Let's say,
it took 20 years to do that. So, in 20 years, the cabin that I bought for 100,000
is now worth 400,000. Have you got it? Okay. Now, had I been saving 1,000 bucks a month
in a 401(k) for 20 years, I would finally maybe have enough money if my 401k
grew well to be able to take out the money (I think) to buy the cabin. But wait a minute, it
doesn't cost 100,000 anymore. It now costs 400,000 because the costs have gone up. And I go, "Well,
okay. I have 400,000 in my 401(k)." No, you don't. Uncle Sam has a permanent tax lien on that. You
pulled out 400,000 you're only netting 300,000. Wait a minute, you're still short the $100,000
that you could have bought the cabin for 20 years earlier. You're still short. People go, "My heck.
What was I thinking?" Yeah. See, you could have taken $1,000 and that would have made the mortgage
payment easily on a 1000-dollar mortgage on a cabin. In fact, it would be less than that. And
so, you pay a mortgage payment and that has mortgage interest and that's tax-deductible.
So, you get the same tax break indirectly as contributing money to a 401(k).
But you're getting up because of a mortgage. But what's the trade-off? People say, "Well, yeah. But
you're you're paying interest." Well, yeah. But look at the asset. It's doubling twice to 400,000.
Hello? See, people who invest in real estate understand this concept. Paying interest is your
friend not your foe. By doing that, you're getting a tax break and the real estate is appreciating.
But I'm going to have you rethink your thinking. What would you rather have at the end of the
day? I mean, I would like to enjoy a cabin or a condo for 20 years while my kids are
young and growing up and so forth instead of trying to save and save and save and finally
hope I have enough money and then after-tax still be short by the same amount that I could
have bought it for 20 or 30 years earlier. Is this making sense? So, I've helped many people acquire
a cabin, a condo, a vacation home and a redirect money they were contributing to their 401(k). If
part of their 401(k) plan was to be able to someday buy a vacation home for cash. Well,
they could enjoy it and have actually better rates of return doing it the way I'm talking about.
So, I'm going to connect this for you next. So, let's imagine for a moment John and Susie.
And they chose to put money as much as they possibly could into a tax-deferred 401(k) or their
IRAs to eventually have enough money to buy that cabin or condo they've always dreamed of. And so,
they want to have a romantic weekend and John says to Susie, "Hey, honey. How about this weekend,
we sit down together in front of the fireplace and look at our 401(k)s statements. And hopefully,
we made some money this last quarter or this last year." Is that going to excite Susie?
No. Who is going to be interested in looking at IRA and 401(k) statements for a romantic
weekend with their spouse? But let's switch that. What if John said to Susie, "Hey, honey.
How about, we spend a romantic weekend down at the 401 cabin or in the 401
condo down in palm springs?" Now, you're going to score points. I think most people would prefer
to have the enjoyment of a condo, a cabin, a vacation home throughout their lifetime instead
of waiting until the end especially when they have to have 4 times the money to be able to
buy it down the road. And so, all of the growth on their 401(k) was gobbled up to be able to afford
it down the road when they could have bought it for one-fourth that price 20 years earlier as
I said. And so, I think it's going to be far more beneficial. If you can get the same tax benefits,
you get the same appreciation rate. Many times, mathematically, people come out ahead
by allocating some of their 401(k) contribution to owning a vacation home because its appreciation
and its tax benefits end up benefiting the people at the end of the day with far greater impact
on their balance sheet, their statement of net worth than their 401(k)s grew to after deducting
the tax impact on the 401(k)s. I have written about this in some of my books like Last Chance
Millionaire. So, rethink your thinking. And I'm sure you would rather be looking at an album of
photos of years and years of family outings and couple retreats in a cabin or a condo. Then a
file cabinet full of 401(k) statements. That does not excite me. So, let's connect the dots here.
If you thought it was best to save in a 401(k) and you sucked away $1,000 a month for 20 or 30 years
and now you have 400,000 to be able to finally buy that vacation cabin, condo
whatever you want. And again like, I've said, you pull out 400,000 and you have to pay tax.
At even at 25% combined federal-state income tax rate, you're going to be lucky to net 300,000.
And you're going to be shocked to find that the condo or cabin you could have built 20 or 30 years
before for 100,000 now cost you 400,000. This is true. I told you that story with my own cabin.
See, I would rather have that file cabinet full of memories photos of weekend retreats with my kids,
my grandkids, with my spouse in our 401 cabinet or condo so to speak than a file cabinet full
of these 401(k) statements. And when you look at it on your financial balance sheet,
your cabin or condo likely has appreciated as good or better than the 401(k). Most 401(k)s
in America are only averaging 3.5%. Did you hear that? Most real estate is appreciating at least 5,
7 even 10%. So, hello? You may end up with a cabin or a condo worth 6 hundred, 7 hundred,
8 hundred thousand versus money in the 401(k) only grew to 400,000. What was the better investment?
Which one built the better memories? See, you have to rethink your thinking. Now, I don't
think you should consume all of your retirement savings because you've got to have money to
buy food and gas and groceries. But if you're earmarking some of your 401(k) for some future
vacation home, rethink your thinking. You can enjoy that now and probably come out ahead
by redirecting some of the money that you're putting into a 401(k). And instead of waiting 20
or 30 years to then buy that vacation home, buy it now. Because it's an investment too if you buy it
right. If you want to learn more about this, you ought to read some of my books. In fact,
my most recent best-selling book is called The Laser Fund. It's a 300-page book. Here's how you
can claim your free copy of that book. So, how can you learn more? If this has peaked interest,
I would love to gift you a free copy of my most recent best-selling 300-page book, The Laser Fund
which is actually 2 books in one. This book here is about 200 pages comprised of 14 chapters with
all kinds of charts and graphs and explanations of how to diversify and create the foundation for a
tax-free retirement. Now, if you learn more right brain with stories and examples, you flip the book
over and read this one. This is about 100 pages, 12 chapters with 62 chicken soup for the financial
soul stories like the one I just told you. If you like to use your whole brain, I would recommend
you read both books. But it's 300 pages. This has been flying off of our warehouse shelves. I'll
tell you what. I will pay for the book. You go to laserfund, LASERfund.com. It's on the screen here.
And claim your free copy you contribute a nominal amount towards the shipping and handling.
I'll cover the rest of that cost and i will send out a book to you. There's also options
there for you to listen and learn and watch and learn. But here's to your brighter future.