Do you have a qualified retirement plan? We have two questions that you need to ask yourself:
- How much money is your financial advisor charging you to perform work that you could be doing yourself with likely only a few minutes of your valuable time each month (or year!)?
- How many opportunities to accelerate the growth of that account are you missing out on because someone else is managing it?
The fact is that most folks will not be financially free when they reach retirement age. They will not even be able to live upon savings without a major reduction in quality of life.
To better understand some important facets of the qualified retirement plan we recommend the reader to this companion article before reading further.
Now for the good news: you can (and should!) take control of your IRA or 401(K). You may feel overwhelmed at the thought of choosing your own investment vehicles for your retirement savings. You will most definitely get some pushback from your financial advisor, who will not want to lose a client (or his 1-3% fees).
But it’s so worth it.
Imagine you are retiring next year at 65 years old, and you only have $500,000 in your 401(K) because you let someone else invest your money in low-yield, “safe” investments. You might be hoping to live another 20 years. Is $25,000 yearly (before taxes) enough to live out your dreams? Will you have sufficient income and savings to assist your children financially occasionally? Will you need to downsize into an apartment or mobile home and sell your house to supplement your savings? Will you need to get a part-time job at Walmart? How will you have any inheritance left to leave to your loved ones?
Everyone will have their own set of needs and goals for retirement, so it might make sense after reading this article to write a list of goals or dreams and put down a realistic dollar amount next to each one.
For instance, you would like to take two trips per year, one in the winter to escape the cold and one in the summer to visit your grandchildren. Those could easily add up to a total of $10,000 or more. You might also want to have a fund of $30,000 per year or more to help your children with unexpected expenses or college tuition.
For most people, living a comfortable life after retirement will take at least one million dollars in savings in today’s money without eating away the principal. More than that certainly would not hurt. To adjust that for inflation, plug it into an inflation calculator online. If you plan to retire in 20 years, you will need approximately double that amount.
Does that amount seem unrealistic to achieve? It doesn’t have to be.
But there are some things you will need to do. Unless whoever is managing your retirement plan is a rockstar hedge fund manager netting you 15% or better per year, you should consider self-directing your retirement plan with a new custodian who will allow you to control your financial future.
How to Self-Direct
- Find out if you already have a self-directed IRA or 401(K).
Your custodian might tell you you can self-direct it only within the stock or bond markets. This is not a genuinely self-directed retirement plan.
To learn whether it’s truly self-directed, ask the custodian whether you may invest it into a private real estate syndication. If the answer is “yes,” and you like your current custodian, you may skip to “Supercharge Your Retirement.” If the answer is “no,” it’s time to shop for a new custodian. - Find a new custodian.
It’s best to get referrals from other people who know you and what your plans are for your retirement capital. You may need to interview several custodians to find the right fit. Ideally, you will look for a custodian that will allow you to invest in a wide range of asset classes, including real estate. - Talk to a trusted self-directed accounts attorney.
It’s also essential to converse with an attorney specializing in these things to ensure you will comply with the rules. Let him or her know your plans and goals for your qualified retirement plan. - Fire your old custodian.
It’s time to ask your custodian to transfer your retirement accounts to your new custodian. You can expect to receive some pushback from your former custodian. You may even need to nudge him along if the process is delayed. Your new custodian should be able to help you with the forms and information you will need to make this transition as quick and painless as possible. - Invest your plan!
Now, you can begin investing your retirement funds into the investment vehicles of your choice.
Supercharge Your Retirement
We will make no bones: we are biased in favor of commercial real estate investment. No other asset class comes close regarding risk-adjusted returns (risk and return ratio). For a closer look at our case for commercial real estate investment see our article entitled “What is Real Estate Syndication?“
Briefly, the advantages are as follows:
- High annualized returns (think somewhere in the range of 15% – after fees!)
- You are invested in a hard asset (it’s real estate, after all)
- Stability (it’s recession-resistant)
It is commonly said that real estate investment has made more millionaires than any other asset class. We think it’s better to diversify into several different real estate assets than within paper assets like stocks and bonds.
Sure, you could invest in a few rental houses. Still, you will have the joys of tenant management, repairs, and renovations. In the end, you might make a smaller overall return than you would have made had you invested passively in commercial real estate with a competent sponsor and saved yourself the headaches of being a landlord.
Conclusion
While the easiest thing to do is to leave your retirement plan as it is and stay within the status quo, the easiest path is rarely the best path. The decision could mean the difference between an impoverished retirement and living out your golden years in abundance and on your terms.
It doesn’t have to be complicated. We aim to help as many folks as possible to protect and preserve their principle while achieving the best returns. Please help us help you. Schedule a no-pressure, 25-minute call with us today to see how we can learn about your goals and see if you are a good fit to work with us to maximize your retirement earnings.
Disclaimer: The opinions conveyed in this article are provided for educational purposes only and should not be interpreted as an offer to buy or sell any securities or to make or contemplate any investment.
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