<prompt> Human: Ive been thinking about liquidating my 401k to start buying real estate. Ive used an early withdraw calculator and have discovered that even after taxes and the 10 penalty, I will still be left with more money than the sum of my own personal contributions. Basically my company matches and those matching contributions more than outweigh the penalty and taxes. Im 26 and would like to start purchasing investment property in the Pittsburgh area which has a fantastic real estate market. My reasoning is that these properties will act as my retirement fund and I may even be able to realize some cash flow in the interim. Thoughts?  <response>: Do not do this. Early withdrawal penalties are not worth it. Stop thinking like I could withdraw more money than I put in. Who cares how much you put in, and how much your company put in, thats a sunk cost. Those are assets you own now, your money, in the most tax-advantaged vehicle possible, that will continue to compound until you retire.As long as your 401k is allocated well, you will make MUCH more money in the long term than in real estate, with much less work. Oh, and also:The price of existing homes increased by 5.4 annually from 1968 to 2009, on average. Natl. Assoc. of Realtors, p.1, p.2 Notice that this is the same figure as new homes by the Census Bureau for a similar period. Once we adjust for the fact that homes get bigger over time, the annual rate is 3.7. The general rate of inflation during this time was 4.5. So here again, homes didnt appreciate faster than inflation. 