Posted in Cash Flow Properties, Retirement Accounts, Single Family Houses

How the Rich Prepare for Retirement

Let’s face it.  Most problems are money related and one of the biggest problems for people today is to retire with enough income to support them.

As I think about it, my dad’s father died at 72 and my dad is a healthy 88 years old who rides a bike at least 10 miles a day.

Nothing is less dignified than to outlive your money and most people don’t do enough to prepare for the inevitable.

When I was young I thought 70 years of age was old.  I look at pictures of my grandparents and I’m telling you, they were old at 70.  My dad looks younger than they did when they passed away.

So it’s critical that we think in terms of how we budget and save to take care of ourselves until the end.  While saving money is critical and there are many ways to do this, retirement is really about replacing income. In our working lives, most of us are used to receiving a pay check.  Out of this income we support our lifestyle and hopefully invest funds for our nest egg of retirement.

The key to a successful retirement isn’t so much to have a huge savings account that we deplete each month, but to replace the monthly income we obtained when we were in the workforce.

I’ve considered this for years and have taken the steps to replace my “day job” with an income stream derived from rents I obtain on cash flow houses.  When you compare single family houses to every other kind of investment you’ll understand my position.

Cash flow houses provide income, growth, have tax advantages and are potentially much less volatile (RISK) than stocks, gold, mutual funds, bonds, certificates of deposits and oil and gas.

They are easy to understand and now, the barriers of entry into this new asset class as described by Wall Street has been overcome by equity funds, real estate investment trusts “REITS” and turnkey operators that provide “hands free” cash flow houses to people who don’t have the skill or time to do this for themselves.

As a young adult, I never counted the cost of future healthcare, property taxes, income taxes and the possibility of ending up in an assisted living facility.  My Aunt is 90 years old (my dad’s sister) and pays $12,000 per month to be taken care of.  She has depleted her nest egg of over $400,000 to a measly $120,000 in just a few years, depriving her children and grandchildren of an inheritance because she wouldn’t take action to shield her assets from Medicaid.  She has blown through her savings like Hurricane Katrina blew through New Orleans.

Don’t let this happen to you!

If you’re approaching retirement, get with a financial planner and consider making choices that allow your estate to remain as intact as possible to pass down to future generations.

Consider investments that allow for monthly income to replace the money you made while in business or in the workforce.

According to a Merrill Lynch report (Merrill Lynch Edge Report, Fall 2013), the “affluent use a variety of vehicles for their retirement investments,” primarily:

  • 401(k) – 32%
  • Personal Investments – 22%
  • IRA – 17%
  • Checkings/savings – 12%
  • Home Equity – 6%
  • Other – 4%
  • None – 2%
  • N/A – 2%

The above statistics should really grab your attention when you look at the top 3 places the rich are putting their money.  71% of the rich are using 401(k)s, personal investments and individual retirement accounts to prepare for retirement.

Retirement accounts are a necessity as they allow your investments to compound without income taxes until you withdraw the money at retirement.  The Roth IRA and Roth 401k have greater tax advantages as your assets in these accounts compound tax free and there is no income tax upon distribution.

But…did you know this? Retirement accounts can hold cash flow houses and other income producing assets like mortgages.  Personally, I think using these accounts to continually produce income and growth through cash flow houses while working and after retirement is the ticket to the “golden years.”  Gold is definitely a pun in that last sentence as we sure don’t want the “golden years” to turn into the “copper years.”

If you’re one of those people that think the government is going to take care of you, well…hope that works out for you. I’m counting on myself to take care of my family and linear descents by making the most of my earnings while working and investing as I’ve stated above.

-RJ Palano