I'm not sure exactly how or why this happens, but I'm
laying, lieing, lying (my apologies to all my past English teachers) curled up in bed at 5AM thinking about the Bear Stearns Investment Bank meltdown.
I'm kidding, right? Nope...just thinking about some poor schmuck like myself, let's say a middle aged (I hate the thought) guy named Melvin (what kind of parents would actually name someone Melvin?). Melvin has been with Bear Stearns for 25 years, worked his way up the ladder and is some kind of Assistant (to the) Regional Manager (thanks to Dwight Schrute). He's making about $175K a year (OK, that's where the comparison with me goes bad) which is above average for a long term investment banker...but hey, it's Bear Stearns, once the 5th largest investment bank in the country.
Melvin has been living the high life recently. Driving the Beemer, fishing vacations in Cabo, splurging on diamond earrings for the wife. He's thinking about early retirement. He's done a wonderful job of loading up his 401k with Bear Stearns stocks and options...of course the company has been generous with matching contributions and doling out generous bonuses for mid-level managers. Melvin is tickled pink when he checks the balance in his retirement account in January of '07...Bear Stearns has hit an all time high of $164.85 per share....wow.
Let's fast forward about 14 months...ouch. Melvin shows up to work and hears the horrible news. JP Morgan Chase (with aid from the Fed...don't get me started) is buying out BS for..."Melvin, are you sitting down?"...2 bucks a share. Hot flashes, knees buckling, light-headed, feeling sick to his stomach. Poof....gone! Gone is the 401k, IRA?..history, Beemer? Traded for a Dodge Neon, family vacations? Gone...even the grandkids educational savings...whoooosh (that's the sound of a vacuum, in case you're wondering). Melvin doesn't know whether to sit and sob or head for the top of the high rise and jump.
Time to reel this story in...remember, this is a real estate blog. I just wanted to put a face on a headline we've all read, but don't really care about. Doesn't affect us (yet)...so what's the dealio? Well, you know each of those BS employees are in the process of what we all know as a "major life change".
My point is...why do people fail to see the security of real estate in comparison to the stock market? Stocks are so volatile, based on what somebody "thinks" they're worth. Even in the midst of the worst real estate market in the last 25 years, a saavy investor, using the services of a real estate professional, can locate several properties in many different locations over diverse sectors that offer excellent returns and an ultra safe place to grow your retirement.
By taking advantage of either a self-directed IRA or the new self 401k (better yet, both) investors can purchase real estate, let it grow and take TAX FREE distributions of all the growth (in a Roth) when they retire. Why let the stock market determine your lifestyle in retirement? There are many options available, even for those who don't like the "landlord lifestyle". How about a totally "hands off" investment in an investment grade property? Using a TIC (tenant in common) group, many times you can reduce your risk and management headaches while yielding a very nice return.
I want to make it perfectly clear...this is something I DO PERSONALLY...not something I talk about to generate sales. It's what I believe in enough to have my own personal retirement invested in. Using a custodian I believe in (www.PenscoTrust.com) I have most of my retirement in real estate. I don't believe real estate can ever completly "vanish" like paper value in stocks. You're always left with the hard asset..the house, the land and a place for someone to live. Let me know if I can help with any questions regarding this concept. On my website (www.SiskiyouHomes.com) there is additional information regarding these ideas. Feel free to check it out....and if you happen to see Melvin...buy him lunch.
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