With lots of competing financial demands from kids to college savings to mortgage payments, saving for retirement seems easy to put off. And the statistics bear this out. A full 50% of Americans will retire broke. And more than 80% will unlikely have saved enough for comfortable retirement.
Savings is a real problem. But so too is strategy. Most Americans remain willfully ignorant, choosing instead to ignore the looming reality – until it is too late! A large percentage of Americans never even bother to do they math: they never assess their retirement needs. And so, without a goal, it’s hard to organize a plan to meet it.
Of course, while pensions are now largely a thing of the past, still many other people are not offered a work-based retirement savings plan, like a 401K.
Here are some things you need to do NOW!
1) Do the Math!
Again, you need to know where you stand! The common formula is as follows. You should plan to expect to draw 80% of you current income. And this should equal about 4% of total saved. Most investment companies have great tools to make it easier. See for instance here:
2) Start Saving NOW
The key is save over time. Is it too late? Well, earlier is always better. But now is always the next best option. If you have a 401K employee retirement plan at work, join it. If you don’t perhaps an independent Individual Retirement Account is the way to go. Do this as a your mainstay, or as an additional extra to your employer plan.
3) Think Creatively to Generate Outsized Returns
Most people think that IRAs must be a bunch of so-called mutual funds – collection of stocks and/or bonds assembled by a large financial provider. Few people realize that such things as ‘self-directed’ IRAs exist. With these you can invest in many other things. One of my favorites, of course, is real estate. For instance, instead of earing 5% on your traditional IRA, you could join other investors to invest in a local real estate project and earn more than twice that amount – maybe 12% – all backed by real estate.
4) Retire on Your Own Passive Cash-flow and Go into OVER-DRIVE!
Another option is to invest in real estate your self. Millions of Americans own multifamily housing because the benefits of numerous – from monthly cash-flow, to appreciation, and tax advantages – , real estate has it all!
For example, let’s say you use $50K of your self-directed IRA as 25% down on a mortgage to purchase a 3 family house at 200K. Now let’s imagine a measly 3% a year appreciation. And remember, the leverage of the mortgage is giving you 3% on 200K (not $50K). Read: you are netting $6K a year on your 50K.
So in reality here is what you are achieving:
(1) An actual 12% return on contribution of $50K.
(2) Cash-flow of approx. $1k/month reinvested back into your IRA.
(3) Tax advantages – like write-offs and depreciation.
So what is your real total return – not considering tax advantages?
Well $6k appreciation+$12k year income =$18K on your initial investment of $50K.
That’s 36% a year!
Imagine a 36% year over year return! Would that help you catch-up on retirement?!?
Of course, you could sell it when you retire, or continue to live off the cash flow. They choice is yours!
If you’d like to find out more about the advantages of investing in real estate, let us know.
Frederick Scott Scribner helps everyday people create wealth through real estate. He is Managing Director of TrueVestors LLC (www.TrueVestors.com), a real estate investment firm, and licensed broker and owner of True Rock Realty LLC (www.TrueRockRealty.com), a real estate brokerage that specializes in real estate investment property. He can be reached a info@TrueRockRealty.com