Financial Advice

What do you have for retirement? 401k,roth?

We have about $100K in 401K. I just opened a Roth IRA last month. I know I should’ve opened one sooner.

I would buy commercial real estate. Or buy multifamily.

And I wouldn’t say it’s a bad time to buy real estate. If it’s a long term hold as a retirement vehicle then you’re going to go through the peaks and valleys.

What kind of commercial? Office space is not exactly in demand right now given that the post COVID economy so many workers are remote. Don’t see that coming back anytime soon. And retail is hurting right now. We’re at the end of the debt cycle and people are buying less given historic inflation levels.

OP said he wants rental yields. Given he “only” has $250,000, a mainly appreciation type strategy doesn’t make sense. That’s more for wealthy people who can play the waiting game.

A good move for OP would be to learn real estate over the next few months or so while growing his cash cushion and earning guaranteed decent interest. Then he can pounce when he finds a good deal. Prices aren’t going up anytime soon, and may well fall. I know a lot of the asking prices for multi family listings I check occasionally have gone down by 5% or more in the last couple months.

Here are some basic ideas you might have already covered:

1. Set aside some of that for an emergency fund that would last 6-12 months if illness, job loss, or other disaster struck

2. Max out your retirement contributions (401k and IRA). A non working spouse is also allowed to make IRA contributions when the family earns enough

3. Consider the I bonds treasuries for both you and your wife. Annually each person with a social security number can buy 10k worth. There are very high yields on these right now (over 9% atm, they adjust up or down based on inflation).

You can also technically do a gift towards the next calendar year (buy your 2023 I bonds) for both you and your wife - making the total amount you can invest 40k. Like every other investment there are significant details to understand:
A) appreciation (yields are recalculated twice annually,
B)need to let them mature at least 12 months,
C) you lose the last three months of interest if the bonds are not held five years or longer,
D) each person may be limited to 10k in withdrawal per year.

4. Think really really carefully before going into real estate. If you only buy one or two properties you will have to manage and maintain (screen tenants, collect rent, repairs on weekends, handle non payments etc) the property yourself or overpay a professional party to do this for you. This may not be to your advantage. Some tenants will view you as adversary making them poor and you rich. You will want to consider a LLC to shield your other assets from tenant and other party lawsuits. Legal fees chasing bad debt can bury you if you are unlucky. Some cities and states have very unfriendly laws on the books that put a non paying tenant turned squatter into a financial sinkhole for a Mom and Pop property owner.

In spite of what people say on the internet there's a lot of work and risk involved. Don't put yourself in a bad situation by investing before you thoroughly understand what you are committing your family to.

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D) each person may be limited to 10k in withdrawal per year.

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Source?

They will say to buy mutual funds. That's all they ever say.

Unless you are a do it yourselfer, real estate sounds like a headache to me. Tenants can be a real PIA.