How To Use An Anti-Financial Plan For Early Retirement

Real Estate

Founder, CEO of Blue Lake Capital LLC. Helps passive investors grow wealth through real estate. Podcast Host: REady2Scale.

When I first heard the term “anti-financial plan,” I was somewhat surprised, as most experts use the term “financial plan” when discussing finances and retirement. But the more I looked into what an anti-financial plan was, the more intrigued I became.

For most people, investing their money and saving for retirement means opening a 401(k). Unfortunately, many 401(k) plans come with high fees, have mediocre returns and make it hard for people to access their funds. As a real estate investor, operator and syndicator of multifamily properties, I tell potential investors that when looking to invest for retirement, you want to invest in a real, time-tested asset, like real estate.

This is especially true with multifamily real estate. Here’s why: Multifamily properties provide income and cash flow through operating income, appreciation when the asset is sold and unparalleled tax benefits that other investments simply don’t offer, especially 401(k)s. That’s why some have taken to calling them the anti-financial plan.

Income During Retirement

Many financial experts will tell you that saving for retirement isn’t about the rate of return achieved, but rather it’s about cash flow. Upon retirement, you should never take out more than 2% per year from your retirement nest egg. If you have $1 million, as an example, that’s only $20,000 per year — which is below the poverty income level in most of the United States. Virtually nobody can live on that amount of money in retirement. Instead, if you placed your $1 million in real estate with an average 10% return per year, your retirement income would be $100,000, which means that you’d be living a completely different lifestyle.

Another key to creating cash flow and passive income during retirement is to gain access to various investment opportunities. Do you want to pursue cash flow, growth or both? That decision will help determine where to invest your money. If your money is tied up in a retirement fund, you won’t be able to take advantage of other types of investment opportunities.

Creating A Different Vision Of Retirement Income

Most people look for accumulation, but to really prepare for retirement, you need to create a different vision. That means you look for cash flow, not accumulating a large amount of money that generates very low returns.

Another key is to find investments that don’t drain you. If you feel you have too much trouble managing income-producing assets, like single-family homes or small multifamily properties, participating in real estate syndications is a viable alternative. Not everyone wants to have to fix plumbing problems or contact other service providers every time a tenant complains about an issue.

The other key to successfully generating cash flow is to diversify your investments. Don’t put all of your money in one type of asset class. It makes sense to put a larger percentage of your money in multifamily real estate, as it historically has shown that it can generate a substantial amount of cash flow and passive income, which is critical to enjoying a successful retirement. However, that shouldn’t be your only investment. Diversifying your investments can create both short-term and long-term investments.

Summary

Many 401(k) plans have a reputation for high fees and mediocre returns. Real estate investing has been shown to be the time-tested way to earn money and build wealth. It’s also important to remember that saving money for retirement is not about the rate of return, but instead, it’s all about cash flow.

One of the keys to creating cash flow is to gain access to various investment opportunities. You won’t be able to do that if your money is tied up in a retirement fund. In addition, investing in real estate can provide a significant amount of cash flow and passive income, which is critical to having a financially solid retirement.

Finally, I always advocate diversifying your investments if you want to successfully generate the type of cash flow required for a comfortable retirement. Investing a larger percentage of your money in real estate is a good strategy, as it has a long record of letting investors earn money while building wealth over time.


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