You Can’t Go Back In Time, So You Better Get It Right Today — Retirement Income

Posted @ 9:57 pm - Filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Retirement Income, 401(k)'s & IRA's, Capital Growth, Goals, Tax Shelter

Let’s take a trip in the WayBack Machine. We’ll set the controls to 1960, when my favorite uncle was 30. Back then the median income was way under $10,000 yearly. In fact, the median income for a 1960 American family was under $6,000 a year.

We’ll ask him to make an informed choice about his retirement, which will commence in 1995. Here are his two choices. His pick will dictate his lifestyle form the day he retires until he dies.

We’ll guarantee him $35,000 pre-tax income yearly for life.

Or — He can invest in that duplex around the corner for $8,500.

I wonder what the response would’ve been if we’d asked 100 30-something year olds back then the same question with the same two choices? What would you predict?

Consider that the guaranteed income is more than quadruple what he’s earning at 30 years old.

Take a married couple today with a couple kids and an family income of $60,000 a year. Let’s try to stay real with this and ask them the same couple questions.

They can retire with a guaranteed $90,000 a year, pre-tax OR they can buy that Texas or Kansas City income property, (In fact, why not buy half a dozen?) and get their real estate investment portfolio started.

I’ve done the following numbers before many times, so won’t repeat them here other than the bottom line. Every $25-30,000 invested today will result in about a million bucks in the next 20 years, give or take. Those numbers assume an average appreciation rate of only 5% — and that you’ll be exchanging your equity periodically in order to recharge your capital growth rate. Any 20 year period you wish to take in my career (10/69) will show an average of far better than 5% appreciation in growth regions.

Let’s say you invest today, and follow a custom made Purposeful Plan (see podcasts) until your retirement. We’ll say your retirement is 2030. If you invest $100,000 or so now, it should be around $4 Millionish give or take a few hundred grand upon retirement. Experience says you should be able to reasonably expect a yield on that equity of 6-8%. Let’s use 6%, OK?

That’s a retirement income of just under a quarter million bucks a year — and it’s probably 50-100% tax sheltered income too.

Let’s review.

You can opt for $90,000 pre-tax annual retirement income for life OR about $240,000 (possibly more) of partially to completely tax sheltered annual income.

These are real choices for real people. I deal with them all the time. They’re teachers, truck drivers, small business owners, from the big city, from small country towns. In real life however, most of them don’t really have the choice of $90,000 a year pre-tax. See, that means they would’ve saved in one way or another about $1.5 million give or take a few hundred grand.

Most folks in their mid-late 50’s have less than $100,000 in their 401(k) or IRA. They need to hop on their horses and get out the whip, ‘cuz their ‘Golden Years’ will mean they’re out there still workin’ and not by choice. I help these folks out all the time. Many of them will be working into their 70’s out of financial necessity.

Make your choice as early as possible.

I suggest you begin your Purposeful Plan around 4:30 yesterday afternoon.

Contact me — but do it today, not yesterday.

This entry was posted on Thursday, April 10th, 2008 at 9:57 pm and is filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Retirement Income, 401(k)'s & IRA's, Capital Growth, Goals, Tax Shelter. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.