A reader wrote in after a rough stretch in the market caused his 401(k) balance to fall from roughly $620,000 to $540,000 before recovering within a few weeks. He is 55, plans to retire at 65, and is considering whether adding real estate exposure could help diversify his retirement strategy.
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A $75,000 Move, Not A Full Rebuild
Moving $75,000 out of a $620,000 portfolio would represent roughly 12% of his current retirement savings. For some investors, adding exposure to another asset class may be worth considering as part of a broader diversification strategy.
Real estate and stocks are influenced by different factors. Public companies are often driven by earnings growth, investor sentiment and economic conditions, while real estate returns can be affected by factors such as local housing demand, rental markets, interest rates and supply constraints.
That does not mean real estate always moves independently of stocks. During certain economic periods, multiple asset classes can decline at the same time. But some investors include real estate in their portfolios because it may provide exposure to a different set of market drivers.
With about a decade until his target retirement age, he has time to evaluate how different investments fit into his overall plan. At the same time, retirement planning becomes increasingly focused on managing risk, liquidity and the possibility of needing income from investments sooner rather than later.
Why The Swing Felt So Significant At 55
An $80,000 move on a $620,000 account represents roughly a 13% change. Market fluctuations of that size can occur during periods of increased volatility, especially for portfolios heavily exposed to stocks.
The difference at 55 is that investors generally have fewer working years remaining to recover from a major decline before retirement withdrawals begin. This is one reason financial planners often discuss sequence-of-returns risk, which refers to the potential impact of experiencing significant losses shortly before or after starting to withdraw money from a portfolio.
Diversification, cash planning and a clear retirement income strategy can all play a role in preparing for that transition.
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Why He Is Right To Skip Being A Landlord
Owning a rental property directly can provide benefits, including rental income and potential appreciation, but it also comes with responsibilities. Owners are typically responsible for finding tenants, handling maintenance, paying insurance and property taxes, and dealing with unexpected repairs.
For someone approaching retirement, the time commitment alone may be enough reason to consider alternatives. Wanting real estate exposure does not necessarily mean wanting the responsibilities of being a property manager.
Fractional real estate investing can address some of those challenges. Investors purchase shares of individual rental homes or vacation properties, while professional management teams typically handle leasing, maintenance and tenant communications.
Understanding What Real Estate Income Could Look Like
Investors considering fractional real estate should understand that returns can come from multiple sources, including rental income distributions, when available, and potential appreciation if properties increase in value and are eventually sold.
The amount investors receive depends on factors such as the performance of the underlying properties, expenses, occupancy rates, market conditions and platform-specific structures. Like any investment, fractional real estate carries risks, including the potential loss of principal, reduced rental income and limited liquidity.
For some investors, the appeal is not replacing stocks entirely, but adding another type of asset to a broader portfolio.
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Building Real Estate Exposure Without Becoming A Landlord
Investors who want real estate exposure without directly owning and managing properties can explore options such as fractional ownership platforms. Arrived allows investors to purchase shares of rental homes and vacation properties across different markets, subject to current investment minimums.
Spreading exposure across multiple properties may help investors avoid relying on a single home, neighborhood or local market. However, investors should evaluate each opportunity based on their own goals, risk tolerance and overall financial situation.
If retirement funds are currently held in a 401(k), investors should also understand the rules before moving money elsewhere. Whether retirement assets can be transferred depends on factors such as whether the account is from a current or former employer, plan rules and applicable tax considerations.
The Bigger Question Is How He Wants To Retire
The decision is not necessarily about choosing between stocks and real estate. For many investors, the bigger question is finding the right mix of assets, income sources and risk management strategies for the years ahead.
At 55, watching a retirement account move by $80,000 in a matter of weeks can be a powerful reminder that volatility is part of investing. Building a plan that matches his goals, timeline and comfort level may help him approach retirement with more confidence—without taking on a second career as a landlord.
Read Next: Find out if your retirement plan is exposed to risks most investors overlook — get matched with a fiduciary adviser today.
Building Wealth Across More Than Just the Market
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Realberry
FarmTogether
Farmland has historically held its value through market volatility and delivered returns uncorrelated to stocks and bonds. For accredited investors, FarmTogether offers direct access to high-quality U.S. farmland starting at $15,000 — fully managed, with no landlord headaches.
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Private real estate and private credit can add income and stability to a stock-heavy portfolio. Fundrise offers access to diversified private real estate and credit strategies through an easy-to-use platform, with professionally managed portfolios designed to generate passive income and long-term growth.
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EquityMultiple
For accredited investors looking beyond stocks and bonds, EquityMultiple provides access to vetted commercial real estate deals starting at $5,000, with only ~5% of opportunities passing their due diligence process.
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