Would You Give $10,000 For $2,500? Are You Kidding Me? by Bill Roberts
Most people facing retirement are asked to make this trade. They are currently earning about $10,000 per month (husband and wife) and probably getting by OK. They can even take vacations, buy gifts for the Grandchildren, and entertain friends.
But then RETIREMENT rears its ugly head. They give up their $10,000 per month income and replace it with Social Security of about $2,500 per month. Are you kidding me? I think I'll just keep working.
More and more of us (Baby Boomers) realize that this is our only choice. We will work ‘til we die.
What we really need is another $10,000 per month to replace our regular income. This can come from one source, such as a couple million dollars in a retirement account, or it can come from multiple sources.
Multiple Streams of Income
If your retirement account is a little anemic, don't despair. We'll supplement it with a little from here, a little from there, and the sum total will be enough to take care of you very nicely.
The Ten Year Plan
If the choice is to work until you die, a ten year plan might be a good alternative. With just this much advance planning most Baby Boomers can provide that necessary $10,000 per month to replace their normal income.
So what do you do? Well, you pick several selections from this chart that "Add up" to the amount you need to retire and then you make it happen. Ten years should be enough time to reach these numbers easily if you apply yourself.
| SOURCE | INCOME | |
| Social Security | $ 2,500.00 | |
| Self-Directed IRA Account | $ 5,000.00 | |
| Annuity | $ 2,500.00 | |
| Four Rental Units | $ 2,500.00 | |
| Trees | $ 5,000.00 | |
| Home Based Business | $ 2,500.00 | |
| Part-Time Job / Consulting | $ 2,500.00 | |
| Network Marketing | $ 2,500.00 | |
| | | |
Self-Directed IRA Account
To achieve $5,000 per month from your IRA, we will need to make certain assumptions:
- You make maximum contributions for 10 years
- You start with $50,000 in your account
- You are able to average 10% ROI
- You invest your IRA funds in real estate
You can do it all yourself or you can seek assistance, but you will need an IRA custodian that allows you to invest in real estate. Most custodians are associated with mutual funds or stock brokerages. They won't let you invest in real estate. You will need to look elsewhere for a more reasonable custodian.
Once your account is set up, you will need to find a suitable investment. It can be virtually anything from raw land to a single family residence (but not your residence) or even something as esoteric as tax certificates.
Your goal is to accumulate about $600,000 in your Self-Directed IRA account. It's not as hard as it sounds. You have ten years. If you buy raw land in the path of progress but far enough out to be affordable, you have two forces working in your favor: inflation and growth. Plus you are continuing to contribute to your IRA every year for ten years.
For more information read this If You Haven't Saved Enough Money to Retire You Better Read This.
Annuity
I don't want to spend a lot of time on annuities. This might represent your "company" retirement, or an insurance policy you bought years ago, or even your investment in money market funds. Whatever the source, this helps reach your goal of $10,000 per month.
Four Rental Units
Somewhere along the way you decided to become a landlord. You bought a 4-plex in a moderate income area. After ten years, inflation is going to turn about 50% of the rent into net positive cash flow. Even if you have a slight negative cash flow when you bought the property, time will "cure" these problems. Rents will increase while your mortgage payment will remain more or less constant. As a general rule, whatever your mortgage payment is now is what your net cash flow will be in ten years. This is merely a function of inflation which is even more sure than death and taxes.
Realize that you will have work to do "managing" this investment and you will wonder if it is worth it at times. Keep your eye on the goal: Retirement with enough income to pay the bills. You could buy four 4-plexes and reach your entire goal right here.
"Who Says Money Doesn't Grow On Trees?"©
This is one of my favorite strategies for achieving your retirement goal. Ten acres of fruit or nut trees can provide a nice little income stream. Whether you grow to sell to a marketing co-op such as Sunkist or Calavo, or you run a Pick-it-Yourself orchard, you can have a roadside stand, or participate in local "Farmers Markets," your trees will definitely grow money for you.
This fits into a ten year plan perfectly because trees take seven to ten years to come into full production. You buy 10+ acres of suitable land on which you plant saplings. You take care of your trees for ten years, and then they will take care of you for the rest of your life. Maybe you want to build your retirement home on the same land.
Home Based Business and Network Marketing
If you can "translate" a hobby into a Home Based Business you will be able to add a few bucks to your monthly income without feeling like you are actually working. You will need to treat it as a business, but you don't need to be a slave to your business, especially if you run it on the Internet. This can also be closely related to Network Marketing. The difference in my opinion is that in a Home Based Business you sell a product or service while in Network Marketing it is more about you making money off the efforts of other people whom you have recruited.
A good Network Marketing business will combine the two. You will "sell" a product or service to the public and you will recruit others who also sell that product or service. If the Home Based Business component is missing from the Network Marketing program don't touch it. If you only make money from recruiting then it is a pyramid scheme and certain to fail and possibly illegal anyway.
Two of my favorite Network Marketing / Home Based Businesses are YTB which stands for Your Travel Biz and Pre-Paid Legal. Both have excellent services which are marketed to the public. I personally use the services and would even if there wasn't a Network Marketing opportunity attached.
If you are interested in any of the topics covered in this post you may call me. Bill Roberts (619) 244-4610.
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Excellent information. Not sure about the trees though. We are some of those people who will work until we drop. :-)