401k vs. Investing in a HouseEGR 403Team 3James Coats – Summarizer Melanie Marin - TechieChris Mui - Organizer

Type of project

Personal Investment Find future worth Fixed Input

Scenario 25-year old engineer Single his entire life Beginning Salary: $52,000 4% Avg. yearly increase Owns his current house and wants

to know what is a better investment

Personal Investing

Option 1: invest in a secondary house to rent out

Option 2: invest in a 401k

Option 1: invest in a secondary house to rent out

Initial cost of house: $530,000 Location: Phillips Ranch Pomona Monthly rent: $1,900 Increase at half of inflation rate Assume 3% inflation

Option 2: invest in a 401k

Money invested is equal to the amount invested in the house yearly

Down payment was split by 30 years and invested in the 401K yearly

Assume a constant 401K rate

Summary

Option 2: Investing in the 401K is the

better investment 401K: $4,300,000 House: $879,000

Sensitivity Analysis

401K balance equals the house balance $878,757.77 when 401K yearly rate is 0.003%

House balance equals the 401K balance $4,345,194.19 when the house appreciation is at 7.9%

URL’s

rentals.realtor.com/rentals eloan.com payscale.com