You’ve heard the typical advice numerous times… Elect to have 10% of your salary (or more if you can) taken from your paycheck every payday and deposited into a 401(k). Diversify, invest more, then hope and pray you’ll have enough to live off and enjoy when you retire.

Every 3 months or so, you get your 401(k) statements in the mail telling how you are doing. Over time you see the money grow (or shrink), thus giving you feedback on your investment strategy. Having fun? Are you enjoying watching your money sit in an account? Does it make you happy? Tell me this… Can you enjoy it right now? What is it doing for you TODAY? Instead of waiting years and years to reap the rewards on that 401(k), why not enjoy life today? Why defer happiness?

As an alternative, take that money and buy a nice piece of vacation property. Think of the beach, or the mountains, or the city… wherever would make you happy today. Buy yourself a 401 (k)ondo. Take that 10 percent (or more) from your paycheck and use it to pay the mortgage and expenses on a second home you can get some use out of. You’ll still get a tax benefit similar to the one the 401(k) is famous for. Every dollar you pay in interest and real estate taxes may be a write off (there are limitations just like with your 401(k)).

Typical questions I hear on this subject:

Q: Will the property appreciate over time, giving me a decent return on my investment?
A: Even in this tough real estate market, real estate has appreciated at about 5% nationally from October 2007 - February 2008. Areas will have ups and downs, but over the long-haul appreciation should fair well. Additionally, you are likely going to be paying down the principal with each monthly payment you make. Over time, your condo will be paid off.

Q: If the vacation property I buy only appreciates at 5% per year, how is that better than the S&P 500’s average annual return of about 9%?
A: One key point to remember is that your 401 (k)ondo will be highly leveraged due to the fact you’ll have a mortgage against it. So while the property itself might only rise in value 5% per year, your investment in it (the actual money you put down) will grow at a much higher rate. Let’s run through a quick example. Suppose you put down $10,000 on a $100,000 condominium. After 1 year of appreciation at 5%, the property will be worth $105,000. So your gain on the $10,000 investment is $5000, equaling a whopping 50% gain. Of course you would need to subtract the expenses of interest, taxes, and insurance, but you can see that the gain is much higher that what the appreciation rate is. Another thing to keep in mind is you might not have to pay a cent of taxes on the gains when you sell…

Q: Can I sell the condo and keep the gains tax free?
A: According to today’s tax rules, if you live in the property (as your primary residence) for 2 of the last 5 years, you can sell it without paying capital gains. Just move into the vacation property for a couple of years when you retire then sell it. That beats that pants off a 401(k)’s rule of having to pay ordinary income tax on every dollar you withdraw.

Q: Should I stop contributing to my 401(k) if my company is matching contributions?
A: No! Never turn down free money. Think of that match as an immediate return on your investment. If your employer is matching you 50% of your contributions, that’s a 50% immediate return. That’s pretty nice. Find out what percentage your employer will match to (usually around 3-5% of your salary). Contribute enough to get that match. Use any remaining money you would normally contribute to the 401(k) for that 401 (k)ondo!

Enjoy life while you are young. Why wait until you have reached retirement age to enjoy your life’s work? Get out and enjoy yourself today! If this sounds interesting to you, please read more in the book Missed Fortune 101 by Douglas R. Andrew.