“Tell me how long you’re going to live and I’ll tell you how much you need to save to retire.” This might be something you would expect to hear from a tarot card reader, but not your financial planner.
However, this is what millions of people hear every day when they start discussing retirement planning with their advisors. The quote reveals the major flaw in traditional retirement planning. The major flaw in traditional retirement planning is that your plan includes estimating how long you are going to live retired before dying. Then, you withdraw just enough from your nest egg to live on while completely depleting that nest egg by the time you die. It sounds morbid to me. They even make a calculator for this type of retirement planning: https://ffcalcs.com/how_long I guess that is why so many people avoid retirement planning all together.
“The goal, in short, is to live far below your means so that you can shovel away an outsize portion of your income.” How much? “Aim for at least 30%,” financial planners say, vs. the conventional target of 10% to 15% for a typical 40-year career. “To do that, make savings a nonnegotiable item in your budget,” says O’Shea, “and funnel all tax refunds and bonuses into your nest egg as well.” – Arielle O’Shea, investing and retirement specialist at NerdWallet
I don’t know about you, but the thought of sacrificing and saving up my investments my entire life (up to 30% of your income) to build up a nice nest egg, only to have to cut my lifestyle and spending upon retirement is not a good one. Having to spend just enough each year from that retirement account to live on until I die so it won’t run out is even worse. Add to it that after all that work, I’ll pass on very little if anything to my family is a travesty.
For my sports fans, you’re basically trying to “run out the clock” or “play prevent defense” with your retirement savings until you die. We all know how that game ends. Now I’m depressed.
I have a fundamental disagreement with this kind of thinking. Who wants to live like a miser their entire life? Who wants to barely live in retirement and be on a very strict budget in our glory years? Who knows exactly how long they are going to live?
“Two roads diverged in a wood, and I—I took the one less traveled by, And that has made all the difference.” – Robert Frost
I prefer a different path.
Most financial planners advice is all the same. Put all your money in stocks and save as much as you can. Then, start selling off so much a year to live on. Save enough so your savings can be sold off over 25 years until you die leaving little to nothing behind.
ApartmentVestors’ Plan:
We buy assets that are tangible in nature, fulfill a basic human need, and that can provide tax advantaged and consistent income, while growing our nest egg and not having to deplete it to produce consistent income to live on.
We use multifamily real estate investments to fuel our retirement.
Why?
Do we do this because we love owning a lot of buildings? Not at all.
We invest in multifamily because of what it can provide those looking at creating a retirement. The most exciting benefit being a consistent income with a nest egg that doesn’t have to be depleted a little bit at a time until it’s gone.
Instead, that nest egg can produce income to live on and even grow, not deplete. Now we’re getting somewhere.
What’s even better?
The income produced by these investments is tax advantaged, meaning that it gets a favorable tax treatment. One of the ways it does this is because of a “paper loss” that can be applied to it called depreciation. This allows owners to earn a percentage of the income produced by the property tax-free.
This provides us income to live on, for as long as we own the asset (no reason to plan on living only 25 years unless you can predict the future), while protecting and actually growing our nest egg. Then, when our time on earth is through, we have a real legacy asset to pass on to our children and grandchildren. Now this is a retirement plan I can get excited about.
Traditional retirement planning has a fundamental flaw. You have to know how long you’re going to live and plan on completely depleting your life-long retirement savings to live during that time leaving you nothing to leave behind. If that is not something that gets you excited, maybe it’s time to start asking questions and looking for another way. To learn more about alternative retirement plans, please contact Craig at craig@apartmentvestors.com or ?(913) 324-5900?.