When it comes to retirement, would you rather have a million-dollar home or $1 million in your 401(k)? It's a tough choice, but the surprising answer may not be what you expect.
According to a recent survey by Investopedia, most certified financial planners (CFPs) actually recommend the 401(k) over the million-dollar home. The reasoning is clear - a 401(k) offers more liquidity, flexibility, and potential for higher returns in retirement.
The Case for the 401(k)
What this really means is that a 401(k) gives you more control and options with your money. You can withdraw funds as needed, invest in a diversified portfolio, and potentially see your savings grow over time. And with the average Social Security benefit only around $25,000 per year, that $1 million 401(k) could make a big difference in your retirement lifestyle.
The bigger picture here is that a 401(k) is a more flexible and potentially lucrative asset than a house. While a paid-off home can provide stability and the option to tap equity, it also comes with ongoing costs like property taxes and maintenance that can eat into your retirement budget.
Homeownership Isn't Necessarily Better
That said, a million-dollar home isn't a bad outcome either. As one personal finance expert points out, a lavish home can provide tremendous utility and happiness in retirement, even if it's not the most financially optimal choice.
The key is to consider your personal preferences and lifestyle goals. If having a spacious, comfortable home to call your own is a top priority, then a million-dollar property may be worth it. But if you value flexibility and growth potential, the 401(k) is likely the smarter pick.
Ultimately, there's no one-size-fits-all answer. The best approach is to carefully weigh the tradeoffs and choose the option that aligns best with your vision for retirement. Because as The Motley Fool notes, homeownership isn't necessarily a slam dunk in the golden years.