How Far Away From Retirement Are You?

Are you looking forward to your retirement or are you dreading it? If you’re like many Americans, you may be worried about not having enough income in retirement to meet your daily needs. 19% of recently surveyed Americans had less than $10,000 saved for retirement. You’ve likely spent your whole life working hard to build a secure future for yourself and your family. Retirement should be about reaping the rewards of all that hard work. Are you now facing a grim retirement comprised of days filled with clipping coupons and doing without?

The time to act is now. No matter where you are in terms of your retirement, there are options to consider that can help to make your retirement more comfortable or even very successful. How far away from retirement are you? Depending on your answer, there’s a possible solution.

 I’m At Least 10 Years Away From Retirement

If you’re ten years or more away from retirement, you’re in decent shape as far as options go. Ten years is plenty of time to build up a nice real estate portfolio so you have passive income in retirement. Now, when you’re looking at something like turnkey rentals, such as the ones my company MartelTurnkey provides, you can get turnkey rental properties that will provide cash flow from about $300 a month to $800 a month, assuming 20% down payment. Obviously, you can’t survive on $300 a month, even if you are getting a 16% return on your investment. But once the property is paid off your cash flow doubles. 

But what you can do if you’re at least ten years away from retirement is keep buying more rental properties. With Fannie Mae, you’re entitled to ten residential mortgages at a time. Let’s say you take advantage of that and you buy one turnkey rental property a year. Now you’ve got at least $3,000 of passive income every month (and that’s on the conservative side). That’s a substantial amount of passive income that contributes toward your overall income. Add that to your retirement savings or pension plan and you could be in a very nice position come retirement, especially since owning rental properties offer significant tax benefits that can offset your income from your day job. 

I’m Two to Three Years Away From Retirement

This is a tenuous spot to be in if you’re one of those Americans who fall short of what the experts say you should have for retirement. Of course, the experts aren’t always right, but you do need to be paying very careful attention right now to your finances at this stage of the game. If retirement is just two, three or even five years away, you need to find an investment that will give you nice returns in a very short time. Financial pundits often recommend low risk investments at this stage, which usually means low returns. Typically, the less risk, the lower returns you can expect. I personally disagree with this line of thinking. There are other types of investment vehicles that will give you that low risk but still offer a high return on investment or ROI.

One option that I consider to be good is private money lending. Private money lending is where you lend your cash to a reputable real estate investor who needs the money for a project Your money is secured by real estate, you get monthly interest payouts, and at the end of the term you get your capital back. As a private money lender you are the bank. You’re lending to real estate investors for periods ranging from about 12 months to 24 months.

A variation on private money lending is a joint venture. As a joint venture partner, you supply a percentage of the capital needed for a real estate project. In return, you get a percentage of the profit when the house sells. You don’t get monthly interest payments in this case but you potentially can get a high return if the project goes according to plan, and your money is still secured by real estate.

Private money lending can pay between 8 and 12% while a joint venture investments can pay between 0% and 20% on your money. And, since you often have first lien position, your investment can be low risk. First lien position simply means that if the borrower defaults, you have the right to foreclose and take ownership, just like a bank would in the event of a default.

There are few other investment vehicles where you can see 10% to 15% returns on your investment in such a short period of time. If you are two, three or five years out from retirement, I recommend that you consider this joint venture option. At MartelTurnkey, we often have investment properties that we’re looking to do a joint venture on. Reach out to me if you’re interested in learning more about how these work.

I Don’t Think I’ll Ever Be Able to Retire

I hear a lot of people say this, usually followed by a wry chuckle. If this is you, chances are you’re one of those who has minimal savings, no retirement fund and no plan for your retirement. Unfortunately, at some point you will likely be forced to retire from work whether you like it or not. Maybe you’ll lose your job at an age where it’s hard or impossible to be hired again. Or you or your spouse will experience a health crisis that necessitates you quitting your job. Or you might just keep on working until one day you just can’t do it anymore; that’s the day you’ll retire. In other words, the day is coming – you’re just not planning on which day it’s going to be.

If you’re in this boat it’s time you face facts that you need to prepare for retirement as much as you can before now and then. Have no savings? Start right now by putting away between 10% and 15% of every paycheck into a savings account. You will start building a small nest egg and with as little as $20,000 you can buy a single family rental and start building passive income. If you don’t have that $20,000 yet, one idea is to look online for crowdfunding or other micro investment platforms. There are a growing number to choose from. Depending on how much you can scrape together by the time you retire, you might be able to have enough to put toward one of the other solutions offered in this article. Remember, just because you can’t see yourself retiring, doesn’t mean it won’t happen. The day will come upon you eventually. Act now to shore up your financial situation as much as you can.

Retirement shouldn’t be something that you fear. But it is something that you need to be proactive about planning for. Don’t waste another minute ignoring the inevitable. Consider these retirement funding options while you still have some time. If you have any questions or would like more information, please feel free to reach out to me.

About Eric:

In a previous life, Eric Martel was an actuary, specializing in retirement plans. Now he’s found financial freedom through real estate investing and owns his own successful turnkey rental company, MartelTurnkey.