As a seasoned financial strategist, I cannot stress enough the significance of meticulous financial planning for your future. As a medical professional, you strive for monetary independence and deserve to reap the rewards of your hard work in a high-powered career. However, you may not be aware of the myriad of options available to build generational wealth.
While many individuals invest in retirement plans such as a 401k, it is crucial to acknowledge that high inflation and stock market volatility can induce stress and jeopardize these plans, potentially impacting your desired lifestyle.
That’s why I urge you to consider a well-rounded and thoroughly researched retirement plan that includes real estate. Not only can real estate provide you with the opportunity to retire earlier, but it can also yield more substantial returns on investment. When comparing real estate to a 401k, it becomes evident that real estate presents a more lucrative option for those seeking to secure their future wealth.
Real estate has proven to be a reliable and resilient investment that can withstand market fluctuations and inflation. Unlike a 401k, which is subject to the unpredictable nature of the stock market, real estate offers tangible assets that can appreciate in value over time, providing a consistent source of income and potential for appreciation.
Furthermore, real estate provides unique advantages in terms of tax benefits and diversification. With proper planning, you can leverage tax deductions, depreciation, and other tax strategies to optimize your returns and minimize your tax liabilities. Additionally, investing in real estate allows for the diversification of your investment portfolio, reducing risk and increasing the potential for long-term wealth creation.
Another significant advantage of real estate is the ability to have control over your investment. Unlike a 401k, where you have limited control over how your funds are invested, real estate allows you to actively manage and make strategic decisions to maximize returns. You can choose the type of property, location, financing options, and management strategies that align with your financial goals and risk tolerance.
Benefits of Real Estate Investmenting for Retirement
Real estate investment is one of the main wealth-building strategies for accredited investors looking to build a financially free future. Here’s why:
Passive Income and Appreciation
In general, real estate offers higher returns than those of a traditional 401k strategy. Investing in a real estate deal (like multifamily investment syndication) provides access to two key income sources: the passive income from monthly rental payments and the lump sum upon the asset’s sale.
In addition, you are:
- Building equity in a historically vital asset
- Hedging your income against inflation
- Tax offsetting (discussed below)
These benefits alone make real estate an ideal option for physicians wanting to build more generational wealth (but wait, there’s more)!
Tax Benefits
One of the main advantages of investing in real estate to build future wealth is tax savings through depreciation. Although it may sound like a warning sign, depreciation is a clever way to offset tax payments due to the depreciation of the property over time (but not the land).
There are opportunities to access this tax benefit earlier with accelerated depreciation, a common practice in many managed funds and syndicates.
Diversification
Investors in real estate deals—especially those managed by a professional team such as a real estate fund or real estate syndication—can diversify their investments.
This could mean different asset types, classes, and geographical locations. Real estate investing through syndication allows investors to choose the type of assets their money goes into directly—thereby maintaining greater control over their cash.
Equity and Leverage
By investing in real estate, you build equity in a historically vital and inflation-resistant asset. In addition, as tenants cover the mortgage on the investment property, you are, in turn, creating greater leveraging power to invest further in real estate or access loans to build wealth.
Thanks to this, real estate investing is a scalable investment strategy, as there are no limits on how far you can grow your real estate portfolio if done correctly. In contrast, a 401k relies on the market conditions and the performance of individual stocks in the market you have no control over.
There Are Different Ways to Access the Market
Thanks to developments in property tech and corporate structures, there are now many different ways real estate investors can access the market.
Some of these include:
- Real estate funds
- Real estate syndications
- Crowdfunding real estate
- REITs
- Traditional buy and rent method
Physician investors are not restricted to one investment strategy and have opportunities to invest their money across several different methods. In this sense, real estate investing provides much more control than a 401k strategy as you can time when to buy, sell, at what rate to set rental prices, or even which real estate syndication you will join.
In addition, multifamily real estate syndications (such as Viking Capital) have diversification built into the strategy.
Benefits of Investing in 401K for Retirement
While real estate investing offers greater profits and additional benefits such as equity, a 401k should not be discounted as a wealth-building strategy. Instead, it contains its own advantages, making it an attractive retirement saving option.
It’s a Hands-Off Process
A 401k is a very straightforward process. You set a savings rate, place the savings in your elected account, choose investments, and then you’re set! In work-sponsored cases, the 401k is even set up for you by your employer.
It’s Tax-Free (Sort of)
The 401k payments you make into your account are tax-free, meaning they’re taken out of your gross pay.
The benefit is avoiding being ‘double’ taxed as with a standard taxable investment account. Instead, the only tax you pay is when the money is withdrawn from the account for your retirement.
Employer Matching
One of the driving benefits of a 401k is the employer matching system in which, as long as some primary conditions are met, an eligible employer will match your 401k payments up to a certain amount. However, please remember that you will be paying fees for mutual funds and ETFs, which can add to a significant contribution over time.
It’s Low Risk
It is a low-risk investment strategy if you responsibly manage your 401k by investing in a diversified portfolio. This is since the overall stock market over the long term has increased—even during downward turns.
Which Investment Strategy Is Best For Accredited Investors?
Investing is a personal undertaking, and while we can’t tell you what to do, we highly recommend real estate to secure your future financial health. If you are an accredited investor looking to build passive income, achieve financial freedom, and build generational wealth for your family, then real estate investments are the way to go.
The level of control, returns, market access, and equity-building capacities are unmatched—plus, it’s a historically solid investment that performs well in adverse market conditions and inflation!
Real Estate Syndication Is the Key To Future Financial Freedom
While both strategies have distinct (and sometimes overlapping) benefits, real estate proves the more substantial option for accredited investors looking to secure their financial future. This is due to the flexibility, higher gains, and equity formed through real estate. In addition, of course, both strategies can work concurrently, and diversification is the foundation of a balanced and safer investment portfolio.
If you’re ready to make the most of your income as an accredited investor and start making moves toward financial freedom, contact us and start investing today.
