Retirement

What do you think is the better plan for retirement assuming that you could only choose one.

  1. Build a nice portfolio of rental property (assuming you don’t mind being a landlord)

  2. Invest regularly in a retirement account and take advantage of compound interest

#1 because #2 doesn’t work for retirement. Everybody in the USA does #2 and the census of 1970, 1980, 1990, and 2000 showed that 9 out of 10 Americans retire at or below poverty income levels. But it really doesn’t work because what you need to retire is not wealth or money, what you need is cash. You can have a bizzilion dollar in stocks but you still can’t buy anything…not even a happy meal. If you need $3,000/month to cover your expenses and you have 10 houses that yield $300/month positive cash flow then you have just funded your retirement. You get the appreciation of the real estate but you also get spendable cash every month.

Rental properties, bought right in good locations.

Time your mortgages to be paid off the same year you intend to retire. Voila, really good spendable income.

If you plan to hold for decades be very picky about what you buy.

If, by any chance, you are sick of landlording at retirement time, you can always sell the properties for a bunch of cash to put into money market funds, or something very very safe. (Once you have retired, you really don’t have time to build it up again if you lose it all through risky investments)

I’ll agree that planning to buy these in the right area will be absolutely key. You will NOT feel the same way about dealing with tenants now as you will in 20, 30 and even 40 years from now for some of us! :lol:

I think a better plan is to buy enough rentals that you can retire in 4 or 5 years instead of waiting until the loans are paid off. The vast majority of people in the United States could retire on 25-50 rentals.

Mike

Everybody in the USA does #2 and the census of 1970, 1980, 1990, and 2000 showed that 9 out of 10 Americans retire at or below poverty income levels. But it really doesn’t work because what you need to retire is not wealth or money, what you need is cash. You can have a bizzilion dollar in stocks but you still can’t buy anything…not even a happy meal.

Here we go again…The reason why so many American’s retire broke is BECAUSE they spend too much vs what they take in…Also typically that %90 figure Bluemoon states is because American’s have the lowest savings rate per person/family in the world…It’s all about material things for us Americans,and as anyone with a 1/4 of a brain knows material things make no income/lose value and are often virtually worthless in a very short period of time…Has ZERO to do with the stock market/stocks…My parents have never owned investment real estate and they have been retired and living well above the poverty level on something called dividends…They recieve about %9-%11 yield on their holdings and checks arrive every month…And another thing if you had a “bazillion” dollars even if it was in a money market account you will be getting very nice monthly interest…Even at %4.80-%5.0…It all depends on your spending habits…It bothers me the way the uninformed take target at the stock market…My parents maintain 2 seperate residences (houses no mortgages) and live very well…And my father has no pension from his previous career and same for my mother…Totally living on interest and dividends, and living way above the poverty line…If you have no knowledge on how to budget what goes out vs what comes in you will go broke even if you own dozens of investment rentals…Also if Bluemoon and others were not aware when you plan to retire you should have a very low % of actual non dividend paying stocks in your portfolio…It’s written just about everywhere that as you get older you should lessen exposure to equities and switch to an income based strategy…

I feel like a broken record to defend this common sense subject constantly here…I’m not sure what the problem is with comprehending something so simple…But then again that’s why so many American’s are broke…They spend more time talking nonsense and less time educating themselves on finances…

rookieNYC If it worked then your parents would be 90%. I would even give you 50% of America not 10%. There is a guy that retired because he hit the lotto and this guy that picked the right number at Vegas and retired and oh yea there was this other guy (your parents) that got lucky in the stock market. He retired also. The proof is in the pudding.

That was being cute. But my point is that you need a system that works for you (America). You are saying you want Americans to be French. We are not French, we are Americans. The French save their money and live like misers so that when they retire they can live like…well they live like misers. That miser model works using stocks. But we are Americans. We want to live large. In order to live large and retire large stocks don’t work.

Now I agree with you Bluemoon…American’s are clearly on a path to destruction…There is no disputing that…The link below is an article I just read on the credit crunch getting worse and how now credit card balances are going unpaid at an alarming rate…And guess why?..You got it…Because us American’s have to live large…

http://apnews.myway.com/article/20071223/D8TNBH780.html

And what’s wrong with living like a miser?..The Europeans always seemed to need less…When I lived in Croydon the English seemed very content with very little in the way of material things…

You know all my contemporaries the guys that work with me and make the kind of money I make all live in 3,000 to 6,000 sqft houses that cost them $600k, I live in the same kind of house too but mine costed $200k. In Houston you can live like a rock star without spending a bunch of money. Before I got started in real estate we lived on my wife’s income and my paychecks were extra money (I make the big check and she makes the little check). We both make six figures from our day jobs. But living on half of our income still allowed us to live better than most Americans. The average American household income is $50,000. That would mean that they would have to live like they make $25k to $30k. That is not acceptable. This is the game we are given. In a sports analogy it is like you need to score more than half the average points per game in your sport in order to make the playoffs (retirement) and you are playing basketball but you are only scoring 4 points a game. You certainly are not in the top half of teams, so you switch to soccer and all of a sudden you are doing fine with your scoring. But we can’t change our sport. We are playing American. So we need to change the way we look at the field. This field has 90% of us retiring at or below poverty income levels. We need to do something else.

By the way I work for a French company. I run one of their American divisions. They do really well on a very small part of their income but they are NOT trying to keep up with the Joneses. They spend their money on what they want, not what their neighbors want them to have. They travel a lot and work to live not live to work. In my neighborhood if you don’t drive one of those Lexus RX-330 then they wonder if you are sick or something.

I will bet my compadries in France are not at work today (Christmas eve). But where am I?

Rookie, is it possible that everyone here recomends real esate over stocks, because this is a real estate site and not a stock site?

I don’t think your average American is capable of playing the stock market into a nice well funded retirement. They either play it safe with retirement fund managers and don’t end up with enough, or they think they are too clever and they lose their money.

Real estate is a lot easier to play. It is easier to learn. It’s a lot easier to understand. It rides out economic cycles better. The wealth is less accessable, which is a good thing if you are trying to save.

Of course, I don’t think that the average American has enough drive to learn how to invest in real estate, either.

I know a lot of peple who thought they were really clever, and they put a lot of effort into it, and lost everything in the stock market. On the other hand, I know a lot of people who have made a lot of money with real estate and still have it.

Greedy grasping lazy people can lose money in either venture.

[i]Rookie, is it possible that everyone here recomends real esate over stocks, because this is a real estate site and not a stock site?

I don’t think your average American is capable of playing the stock market into a nice well funded retirement. They either play it safe with retirement fund managers and don’t end up with enough, or they think they are too clever and they lose their money.

Real estate is a lot easier to play. It is easier to learn. It’s a lot easier to understand. It rides out economic cycles better. The wealth is less accessable, which is a good thing if you are trying to save.

Of course, I don’t think that the average American has enough drive to learn how to invest in real estate, either.

I know a lot of peple who thought they were really clever, and they put a lot of effort into it, and lost everything in the stock market. On the other hand, I know a lot of people who have made a lot of money with real estate and still have it.

Greedy grasping lazy people can lose money in either venture.[/i]

Since I’m involved in both markets (real estate and equities) I can say honestly that I feel more passionate about real estate…And I have spent decades involved in equities and still work in the industry…Yet this is coming from a workaholic…I enjoy going through learning curves and reading and researching…Most people that I have encountered in life (friends etc) are lazy…No one wants to put the time in to learn anything ,yet they have time to watch sports and have fun etc…Real estate is not easy if you don’t do your homework…I love to go over cashflow returns on my properties and prospective properties…At the same time my non-market related friends who can afford to get into real estate refuse to take the time to learn and understand how to make money in this game…So yes the stock market may very well be better off for the lazy person but I can assure you real estate can sting all the same or worse than equities if done incorrectly…Look at the countless threads of RE investors that have bought incorrectly and face losing it ALL,not some of their money…It’s a double edge sword and survival of the fittest in any investing arena…

And yes the typical American does not have the discipline to spend countless nights and weekends reading,researching and understanding methods…If you are not passionate about it there is no sense doing it…But I feel any investment that requires money should be fully understood before investing one dollar…Yet many rather dive head first into the unknown only to hit a wall…

As for the dreaded D word (diversification)…After reviewing my ROI numbers I can definitely say without doubt that my real estate returns beat the daylights out of my equity returns for 2007…But I feel comfortable with my current allocation because I know there will be years when that will be different…I don’t swing for the fences in the equity markets and place very close to the cuff…Same in the RE markets…

Equity indexed annuities and certain types of variable life insurance will do a better job than both options. Real estate has better tax treatment than stocks and can build wealth faster to fund the annuity or life insurance.

There are only 2 investments worse than stocks. One is the lottery and the second is insurance/annuities.

How do stocks and real estate beat tax free growth, stock market returns, guaranteed minimum returns even in a down market, tax free withdrawals, and no work.

Annuities are mutual funds wrapped up in an insurance policy. You ask why not just buy the mutual fund as an investment. In general you buy insurance for insurance not for an investment. If you do anything else with insurance it is generally going to generate excess fees. That is fine if you have little to no financial abilities and need to have it done for you. Since the annuity is stock based when the stock market crashes you can end up with losses to you principal. Another problem is that once you annuitize the annuity your payment is fixed forever. As inflation is low now it is not a big problem. After Hillary becomes President and inflation rises rapidly your payments will remain the same and you will be eating cat food.

Bluemoon is %100 on the mark…Only the insurance agent selling this high fee product makes out well…Better way to is to simply buy term insurance and invest the difference in a basket of mutual funds…

Also the complexity of these insurance products is baffling…Try looking up infinite banking concept by R. Nelson Nash …The fee base and the concept is so confusing it amazes me who buys these products…

If I have to be sold on any investment I would never do it…And insurance based investment products are also not liquid and the fees paid to the agent are enormous…Insurance agents that sell these products are well dressed hustlers imo…

I’m taking about equity indexed annuities, not variable annuities. They have a minimum return of about 2-3% if the index goes negative. They get the index return when it’s positive. Participation rates vary depending on the product and features you want, like an increase in payments to match inflation. They don’t carry the fees of mutual funds because there is no management of investments. The company is using an index to determine growth.

The mutual funds are subject to market risk and taxes. The insurance guarantees a minimum return each year.

Just because you don’t understand it doesn’t make it bad investment for everyone. It’s just inappropriate for you.

Once the surrender period expires, they are completely liquid and distributions can be tax free. There’s no free lunch. Everything has a cost. What matters is if the cost exceeds the benefits.

Just because you don’t understand it doesn’t make it bad investment for everyone. It’s just inappropriate for you.

BLL with all due respect I work amongst the smartest and most highly educated minds on Wall street…The Hedge Fund that I work for handles a sizeable amount in assets and I can tell you the quants that I work with were stumped to understand the benefits of Nash’s claims other than saving finance fees…So to say I don’t understand it wasn’t correct to say…But I do understand your position,it’s a salesmens job to make others feel like they are missing out on not investing in such a product…I’m sure it’s no secret to you how many people are on the fence in regard to investing in these type of investments…If these were such highly sought after investments they wouldn’t need salesmen to attract investors…More so I truly feel uncomfortable investing in something that I can’t find anyone else investing in…When we had a salesmen in our office we asked for numerous references of customers who use this product ,the salesmen balked and had not a single person,phone number,investor to give…

I’m not familiar with his material and never read it, but I will check it out. I don’t know if his material covers the same things as I am.

I don’t know your background, eduction, or anything about you. With respect, it does sound like you don’t fully understand what I am talking about, but as far as I’m concerned, we just agree to disagree.

Who said I was an insurance salesmen or that is my position? I presented another option to the original poster that merited some investigation on his part to see if it makes sense for him. Most RE investors believe that is the only way to invest. Stock market investors swear that is the only way to make money. I’m not saying anyone is missing out on anything. Only there are more options than the 2 provided.

People should educate themselves and then seek out the product that makes sense for them. Any salesman who pushes a high commission product not in the best interest of the client should have his license revoked. These product makes sense for some people and are inappropriate for others. It’s not reasonable to rule them out out of hand because a salesman is involved.

BLL,
To say I don’t fully understand the numerous terms,conditions,clauses,phrases,meanings,death benefits,whole life,multi funded life,annuities,variable annuities,riders,deductibles,MEC guidelines is true…It’s a maze of research that I have found to lead to no where for me personally…I’m assuming that why so many invest in real estate/stocks vs these thoroughly complex type of insurance policies is because of the simplicity vs the complexity…I have been in the equity industry for a very long time and have yet to meet 1 single person who ever recommended insurance products…Not 1…Even though as I’m sure you are fully aware of it’s illegal in some states to market insurance policies as investments…I believe Florida is one of those states…

But being the open minded individual I try to be I’m willing to read/listen to you teach what and how I’m missing out on…I can clearly say that I’m a doubter of Nelson Nash and his infinite banking system…Prove me wrong and I will stand corrected…And the reason why I feel so many push real estate is because it just makes sense…As it is not easy (god knows I learned my lesson on using that word here) but it just makes sense when done with discipline…

But in a respectful way I’m more than willing to be taught something new…So if you wish to IM me here or continue you have a student for the time being…