Retirement Planning – Creating Your Own “Personal Pension”
Your retirement is under attack! No, it’s not from aliens or other counties, but from dwindling employer funded retirement plans and pensions that are becoming extinct. It seems that every day in the news there is a story about how social security is under-funded, a company is cutting their retirement plans or declaring bankruptcy because they can no longer afford to pay retiree benefits. Heck, even city governments are trying to duck their commitments to their past employees. The fix is in. You can no longer count on employers or governments to fund your retirement. You must do it on your own. Did you get the memo?
If not, today is the day to start thinking about funding your own retirement. We like to call it “creating your own personal pension”. In case you are younger than 65 and have never heard of a pension before, as they have almost become extinct, don’t worry.
Back in the day, major employers, cities, and states, provided a retirement income or pension for employees that worked with them for a specified period of time. A pension is basically an agreement that said if you work for us for 25-30 years, at retirement, we’ll pay you a portion of your salary until you die. These were great for our parents and grandparents and promoted employer loyalty, but have gone the way of the dinosaur in recent times. Have you ever had a job offer that includes a pension? Probably not.
The good news is, you do not have to wait for an employer or work for the government to get a pension. You can create your own. In fact, there has never been a better time to create your own personal pension and take charge of your retirement. We see people do it every day using rental real estate.
You can create your personal pension many ways, but the steps are very similar.
4 steps to creating your own personal pension:
- You invest in rental real estate that provides cash flow income each month after paying all bills
- You wait as the property and its tenants pays off its own mortgage for you by the time you plan on retiring
- Once the mortgage is paid off, you retire and replace your current income with your rental income providing you an income or “pension” for the rest of your life
- You travel, golf, and enjoy time with your family the rest of your life. Then, pass it on to your legacies
It’s not complicated, but do you know how many people actually follow that plan? Very few. However, anyone can and you don’t necessarily have to have a lot of money to get started.
For instance, several years ago my sister rented a duplex from a really nice couple. We got to know them and found out they work for the US Postal System and deliver the mail every day. They decided they need to take control of their retirement. One day while delivering mail in a neighborhood they really liked, they saw a duplex for sale and an opportunity to provide for their future retirement. They ended up buying the duplex and renting it out for enough to pay the mortgage on a 15 year note, its expenses, and to have just a little extra cash each month. Later on that year, there was another duplex that came up for sale in the same neighborhood and they did the same thing. Fast forward 5 years and now they own 10 duplexes in the neighborhood that rent for about $700-1000 per door.
I asked them why they were buying all these duplexes and they said it was simple. They were investing for their retirement. Both of them had a plan to retire within the next 15 years (they were only about 40 at the time) and these duplexes would all be paid off by then and they would live off the income they produce. I started adding it up in my head and though, even without increasing the rent, the duplexes will be generating close to $20,000 per month in income without increases in rent. Wow, that was WAY more than they made now. Not bad for a couple postal workers. They were the small percentage of people who will actually have their income go UP at retirement. Pretty cool if you ask me.
Their personal pension plan wasn’t revolutionary, extravagant, or even that hard to do given enough time and a little effort. This couple wasn’t “rich” and they didn’t live extravagant lives. They didn’t have a business or trust fund handed to them or even quit their jobs. You don’t even have to do all the work for yourself (we’ll talk about how to do this in our next article). But this couple was willing to do what most people are not. They were willing to develop a plan for their future, take action, stick with it, and not deviate from it.
While your retirement may be under attack and traditional pensions are a relic of the past, there is something you can do about your retirement. You can create your own personal pension to make sure your income continues to come in long after you decide to retire. This personal pension will allow you to live the retirement of your dreams well after your last payroll check comes in.