Fun With Ken and Barbie, Part 2 by Bill Roberts
Last time in Fun With Ken and Barbie we calculated their Cash Needed Budget for when they retire. They "down-sized" from their big family home into a nice two bedroom house in a very nice gated community with all the amenities that they wanted. They are happy there.
When all was said and done they needed an average of $8957.00 per month to maintain their lifestyle. About 80% of this total is subject to inflation. We will use an inflation factor of 5%. This will go on as long as they both shall live. Your retirement money needs to be inflation proof.
| Description | Year 1 | Year 2 | Year 3 | Year 4 |
| Mortgage | $ 1,760.00 | $ 1,760.00 | $ 1,760.00 | $ 1,760.00 |
| Taxes | $ 417.00 | $ 421.00 | $ 425.00 | $ 430.00 |
| All Else | $ 6,780.00 | $ 7,119.00 | $ 7,475.00 | $ 7,849.00 |
| Total | $ 8,957.00 | $ 9,300.00 | $ 9,660.00 | $ 10,039.00 |
So, as you can see, they will need more money every year.
What to do about it?
Well, social security will go up a little bit each year. Probably around 3%. Don't look for more because they are running out of money and they will be looking for ways to reduce what you get, not increase it.
So where does it all come from? If you haven't provided for it, then don't retire!
But Ken and Barbie are ready to retire. For the last ten years they've been getting ready.
They set up a Self-Directed IRA and rolled Ken's old 401(k) and his IRA into it. That was 10 years ago and it had $100,000.00 in it at that time. Ken continued to make maximum contributions into the plan.
Ken directed the custodian to invest the plan's funds in real estate. It now has a value of $1,000,000.00.
Barbie has always sold a little bit of Mary Kay cosmetics. They "realized" that they would need additional "streams of income" when they retired. So they signed up for several network marketing opportunities. They are now making about $3,000.00 per month from these ventures.
Three years ago they "down-sized" their home. They sold their old family home for $800,000.00. They only owed $200,000.00 on the house, so their proceeds were about $600,000.00 they took $500,000.00 of the proceeds and "invested" it in a real estate syndication of a small strip mall that was under construction. They are now getting about $5,000.00 per month as their share of the revenue from the shopping center.
So here is the complete picture of Ken and Barbie's retirement income:
| | |
Social Security (combined) | | $ 2,500.00 |
Self-Directed IRA Distribution | | $ 6,500.00 |
Network Marketing | | $ 3,000.00 |
Strip Mall Pass-Through | | $ 5,000.00 |
| | |
Total | | $ 17,000.00 |
They are well within their budget, and they can actually continue their real estate investment program.
The worst thing that can happen to retirees is to out-live their money. Ken and Barbie won't have that problem. You can do just as well as they did if you start now.
If you would like a complementary initial consultation give me a call. Bill Roberts Baby Boomer Retirement Planning (619) 244-4610.
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Bill
When you form your meetup group, let me know....this is a simple but effective way to explain options to Baby Boomers who have so much spending power, which we need to ensure they are able to maintain for their future.