Important points
- A 401(k) provides liquidity, flexibility, and potentially higher returns, making it a favored choice among financial planners.
- Owning a home can eliminate monthly rent or mortgage payments, though it does come with ongoing expenses such as taxes and maintenance.
Would you prefer a home worth $1 million or a 401(k) with that same amount saved for retirement?
Investment experts recently posed this question to Certified Financial Planners (CFPs), seeking their preferences and reasoning.
The majority of financial planners leaned towards the 401(k), citing its liquidity, lower ongoing costs, and better potential for returns.
However, it’s worth noting that a 401(k) may not suit everyone’s needs. If someone desires a personal living space, a home could be a more fitting choice. On the other hand, for those prioritizing easy cash access, a 401(k) might be the way to go.
We’ll explore the benefits and drawbacks of both options to help determine what might work best for you.
What can you get with your 401(k)?
A 401(k) is a sort of tax-advantaged retirement account.
With a traditional 401(k), you can deduct your initial contributions from your taxable income, paying taxes on withdrawals at your usual income tax rate.
These accounts generally provide a selection of investment options, including index funds and target date funds.
Though you typically need to wait until age 59 and a half to make penalty-free withdrawals, retirement investors have considerable flexibility regarding how and when they can access their funds. Still, remember that traditional 401(k)s require minimum withdrawals starting at age 73.
“When considering retirement, liquidity is essential, and the 401(k) is clearly superior,” said Flavio Landibar, a senior financial advisor. “We have more control over when and how much we sell, while the rest stays invested.”
What do you get with a house?
First and foremost, homes provide a place to live.
Instead of making large monthly payments like you would with renting or a mortgage, owning a home offers the possibility of selling it for a profit if its value rises.
From early 2020 to late 2025, home prices nationwide climbed by nearly 55%. However, this increase varies by location and doesn’t factor in ongoing homeownership expenses like property taxes and homeowners association fees.
“If I had a million in my 401(k), I’d definitely buy a house,” commented Michelle Gessner, a CFP. “The reason? Homes come with significant ongoing costs—property taxes, insurance, repairs, and security to protect against theft or damage.”
Which one should you choose?
Ultimately, your ideal choice depends on what you specifically want and need during retirement.
For those seeking flexibility and easy cash access, 401(k)s present low fees and a variety of investment options, along with the ability to withdraw funds at age 59 and a half.
Conversely, if avoiding rent or a mortgage is crucial—or if you’d like to leave a property to heirs—homeownership might be the way to go. Yet this path also features downsides, such as limited liquidity (though options like reverse mortgages and home equity lines of credit exist) and ongoing costs.
