Real Estate & Investing For Retirement
Real estate investing and retirement investing go hand in hand. How do they come together, why are both so necessary for all individuals and families?
Investing in real estate is a critical part of retirement planning, and has a lot of advantages. Active real estate investors also need to build a retirement plan into their overall goals and financial planning. Blended together correctly these two factors have the power to give individuals the lifestyle they want now, cover them for the later years, and provide the best chance at creating a lasting legacy.
The Retirement Crisis
American are critically underprepared for retirement. They may actually be among the least well-prepared for retiring in the world. We now have one of the lowest rates of homeownership on the planet. Almost 30% lower than countries like China, Romania, and Cuba. America also has some of the least public assistance. That is especially true when it comes to healthcare and prescriptions. On top of that, Social Security benefits are drying up, despite workers continuing to give up a chunk of their paycheck for them, and 84% of current retirees relying on them.
The two big issues today are that Americans are woefully behind on retirement savings, and secondly, that money which is slated for retirement isn’t normally in smart investors that can be counted on long term.
Many have put off savings and investing in exchange for lifestyle spending. Even among the power savers, many are shooting far too low. The Insured Retirement Institute and Investopedia report that just 20% of 40 year old individuals are on track, by having $100,040 saved. A surprisingly high 26% of 60 year old Americans have saved $260,500. That sounds great, for this group, until you do the math on how much you really need to retire. If you are barely getting 4% net returns, or you are drawing down from that capital over a 30 year retirement, you’ll have to live on less than $1,000 per month. How are you going to pay for housing, food, healthcare premiums, and transport? Never mind golf, vacations, or treating the grandkids to ice cream. Don’t forget about inflation either, which will make all of those things more expensive in the years to come.
What Active Real Estate Investors Are Missing
Real estate investing is a great way to make money and build wealth. However, many active investors who are wholesaling and flipping houses get caught up in the action, the boatloads of cash flow, and forget long-term planning. If they slip, or have a hiccup in their income, and they owe tens of thousands per month in car leases and financed jewelry, they can find they are quickly struggling to stay above water. It is vital to keep one eye on the long game. Especially as you probably don’t have an employee pension plan.
We all need a retirement plan. We can’t expect to work forever, or for our earned incomes to stay consistent or growing forever. The failure to have more than a 5 year plan is what has tanked the most investors in the past. That applies even if you are making $10ka month, or $1M per month.
Bringing it All Together
Those who are already making strides towards saving for retirement need to have real estate in their portfolios for long term wealth building and passive income. Active house flippers and wholesalers, should also be putting long term investments in their own portfolios, as well as automating their businesses as early as possible. Rental properties and private lending are likely to be two great assets for all individuals.
This can be made even better by investing in real estate through 1031 exchanges to lower taxes, and compound long-term gains. Investing through self-directed IRAs and 401ks are another powerful strategy for getting a quick and powerful start on scaling retirement savings. Though there is always a place for wholesaling and flipping for those who want to generate quick disposable cash in the short term as well.
What are you investing in? How are you doing it? How is your retirement fund looking?