Some investors are choosing to forego Wall Street on their road to retirement and are instead putting their money in real estate as their 401(k), write Veronica Dagher and Anne Tergesen for The Wall Street Journal.

Instead of relying on the stock market to secure their future, real-estate retirees prefer the steady income they receive from their rental properties, as well as the tax breaks from being landlords. Some of them enjoy renovating and restoring properties.

According to an analysis of Federal Reserve data by Boston College’s Center for Retirement Research, around 10 percent of United States households with someone 65 or older earned income from rentals in 2022, compared to seven percent of households of people under 65.

Relying on real estate means working in retirement. Rental units can sometimes sit empty, while urgent repairs and tenants who do not pay rent on time or damage the property bring headaches. Additionally, the costs of owning a property are rising, from property taxes to insurance.

“If you’re a landlord, it can be difficult to feel like you’re truly retired,” said Daniel Johnson, a financial planner who specializes in retirees with multiple real-estate holdings.

However, those choosing real estate as their source of income in retirement believe that the rewards outweigh the risks. Many who are retiring today on real estate are benefiting from decades of both home price appreciation and the low mortgage rates they locked in.

Josh Bottfeld, who retired in 2004 at 53, said he feels safer holding real estate than stocks. He owns 14 units in seven buildings and pays property managers up to 10 percent of the rent to find tenants and perform maintenance.

“I could be making a lot more money if I were managing them myself,” he said. “But I don’t want to be bothered.”

Fred Hubler, the CEO and Chief Wealth Strategist at Creative Capital Wealth Management Group in Chester Springs, is a fan of real estate.

“God is not making any more land, or so the joke goes,” he said. “Real estate has been a primary, basic allocation of our flagship model. For most busy professionals, even if they have the money, they don’t have the time to buy and manage a property. We’ve been utilizing putting cash into a Delaware Statutory Trust (DST) investment that will give the owner the real estate exposure but not the landlord headaches. It’s not for everyone, but it is a solution for our clients.”

Read more about real estate as a 401(k) in The Wall Street Journal.

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