Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
In most instances, I would assume it is for two reasons. To generate passive income which will help eliminate the need to work and to help with our retirement.
Normally about this time of year, various magazines come out with an article that in my opinion is ridiculous about how much it is going to take for you to retire comfortably. There are many on bigger pockets that are probably already retired and would find those articles silly.
Having been retired for some time and running around in circles of other retired people, I have some definite thoughts on this area. I'm going to use some specific examples which hopefully will contradict what these magazine articles normally post and give each individual more hope for enjoying their retirement somewhere down the line.
Retirement can look much different to various people and I would love to have some additional input from those that are retired or possibly are preparing for retirement with an actual plan. This should encourage you even with possible troubles in the future. We all know the median income is lowering and when you find yourself unemployed and then reemployed, the majority of the time the new job pays less than the old job. Even if you are still young, I would encourage everyone to try and plan or strategize what their retirement will look like and how they will pay for it, and don't plan on too much from Social Security.
There are other threads on bigger pockets about the subject but I would really like some additional input from those that have either given thought to retirement or find themselves retired. Thanks. Rich
Investor · Fort Wayne, IN · Member since 2009 · 391 posts · 257 votes
13y
I set a goal to become Financially Independent as opposed to simply setting a retirement date. I define Financial Independence as the time when your passive income meets or exceeds your required expenses.
I achieved that goal 10 yrs ago (age 41). Although I had done an excellent job of planning for financial independence, I did not have a plan for what came next. I felt like the proverbial dog who chases cars and finally caught one and had no idea of what to do next.
I served another 8 yrs in the Air Force after achieving financial independence before I finally retired. It is really a nice feeling when you go to work because you want to and not because you have to.
When I retired from the Air Force, I still had not developed a good "what's next plan."
It was nice to slow down for a while but I eventually started two more businesses to go along with our real estate businesses.
It took a little time but I now have a very nice blend of free time and productive activity.
My advice is to spend some time contemplating how you are going to spend your "post financial independence time."
Good luck on your journey.
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
13y
Hey Rich I wanted to weigh in earlier but I was just doing some BP catching up while at the W-2 job so I just had time to @ people and think about my response this afternoon.
For me my definition of retirement is similar to yours, have enough money to live comfortably and to continue to grow passive holdings simultaneously but not to have to continue to invest to have an income coming in.
I'd like to retire in the next 15 years (I'd be 40) with about $20K/mo gross for living expenses (I am in CA so that definitely doesn't go as far here between taxes and cost of living).
My goal honestly is somewhat twofold, I would like to partially retire in the next 2-3 years having enough passive income to not need the W-2 anymore. This will take about $5K/mo. The reason for this is that would be when my daughter would start school, and I'd like to homeschool her (I was HS and think I turned out alright) but I'm a single dad so that's what it would take for that to work. I would still invest but I would be focused on doing it without requiring my income to make it happen.
As of now I think I may just be able to do it by about the end of 2014. I have a W-2 that provides me about $6700/mo and I either invest, 401K or give to church about 35-40% of that so if I make my $5K number I should be alright staying home. Then I would focus on my daughter and doing RE to continue to build that passive income.
And you better believe math lessons are going to involve CAP rates, COC, ROI and other useful equations, I've got to leverage her for my staying home somehow. ;)
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
I plan to have enough so that I can live off the returns only and not have to touch the principal. I have a neighbor in his mid 70's. He told me one day that he has enough money to last another eight years. I asked him, "Then what?" He didn't have an answer. I would hate the thought of outliving my money and being destitute.
The financial people all throw out numbers like needing 1.5 million for a nest egg. I don't see how this is enough. With returns on safe investments being so low these days, you would have to stretch that 1.5 million out to last. What if you live to be 100?
Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
13y
Rich Weese My number is a net number but pre-tax. Do I need that much to live on? Of course not, but nothing wrong with over planning the needs. I had conversations with several people who live a very comfortable lifestyle in retirement and on average they said they spend about $150k per year, without any mortgage expense. I was shocked at that number and started planning accordingly. I want to enjoy myself in retirement, not just "get by" like I see so many people in Florida doing.
Midvale, UT · Member since 2013 · 60 posts · 10 votes
13y
This is an awesome post. Thanks @rich weese for starting it. As someone pretty new to investing, I am not even sure what my # is. So I have been basing it on the combined income from myself and wife. W-2 @ 90k a year. We have done a poor job up until this year of managing/budgeting. We set a "goal" when my 20 month old dauhhter was born to have her stay home full time with our two young kids. The plan was for it to be this month. In December we ran numbers and were way off. That was why I even started looking into investing. Now that we've buckled down and more importantly got a budget, we have eliminated almost 20k in debt since December. By the end of July we should have another 6k taken care of and she can stay home.
I say all this, because with no debt payments other than the OO mortgage, it's not that much to maintain lifestyle in Utah. I think I would be comfortable now at net 3k and could be a bit lavish at net 6k a month.
Now I just need to start acquiring some property to generate that money passively :)
And to be clear, I agree on the retirement definition of the majority here, do what I want when, I want, and have income not effected by those decisions.
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
13y
Originally posted by John Chapman:
However, I've always had the impression that we aren't a true cash flow city like I hear about in some of the midwest cities. I've never gotten anything like a 25% coc return, though I work full time, don't do sweat equity, and am most likely not privy to the most smoking deals, so maybe others are.
John Chapman I think if we had the guts to invest in south Dallas we could get those kind of returns.
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
13y
Rich Weese I have to agree with a lot of the commenters here that this is a great thread you started!
My numbers were free and clear assets and the cash flow was net before taxes. I also don't plan to "retire" until my primary residence is paid off (1.5 years after the rentals are all paid) That $12K/month is less than I make now with my 9 to 5 job but like Joel Owens I live frugal and still have fun so that amount would be more than enough.
The whole couch thing was tongue in cheek but boy it sure would be nice for the first week after quitting my day job.
There was a good episode on Frontline called The Retirement Gamble that really made me greatfull that I discovered passive income through REI.
Rehabber · Nashville, TN · Member since 2013 · 16 posts · 5 votes
13y
Great post Rich!
I am shooting for $12K/mo cash flow in todays money, after tax, from REI. This number is only a replacement of my personal income. Not sure how much I would actually require because, like Matt, I am only 25 and I invest over half of what I make now. I am also shooting for $3MM in non-REI assets, such as stocks/commodities and cash in investment accounts.
This is my 10 year goal. I should easily exceed my cash flow requirements by that point but hope to pay off a solid portion of the REI and my personal residence before I quit the W2 job. After that 10 year mark I plan to "semi-retire" into my own personal part time investment manager. Continue REI. Maybe start a small business or farm. The idea is, like Rich, do what I want, when I want without worrying about matters of a monetary origin. This of course is todays plan and it will have MAJOR changes once children and major life events come into the picture. Gotta be able to roll with the changes!
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
13y
Jean – I really like your number of 60,000 per year or 5000 per month. I just don't understand the $12,000 per month the people continue to espouse. This is not what I see in the real world of retired people. I don't want investors that are early in their program thinking that is the number they need to obtain for comfortable retirement. In my opinion, it is way high.
Matt – I also like your number of $60,000 per year. Your number of $20,000 per month which you feel is necessary because of being in California made me laugh. I have a place in California where I can live very comfortably for $3000 per month and that includes golf every day all day. Would you like to know how? I am also able to do that in Arizona and so are many other individuals. You would be able to set up a situation like this for well under $200,000. I also tithe 10% to my church and give away an additional 10%.
Rob K – I really don't think the nest egg assets are as important as the passive income. I don't care whether the passive income is derived from investments, Social Security, pension, inheritance etc. I've run into hundreds of people that are retired very comfortably without a nest egg like recommended by various magazines. I assure you it is being done for less.
Steve K – I'm shocked by the number $150,000 also! I'd love to know what they are spending their money on. Any ideas?
Josh F – fantastic numbers! It doesn't surprise me that someone from Utah is looking at numbers that in my mind are much more realistic. It is also impressive that you are new to investing but already have goals and strategy in place to accomplish what you want. I have no doubt but that you will reach them. My main home is in St. George Utah, so if you ever visit there, check and see if I happen to be there. I love to meet with bigger pockets members. I agree with Gary Parker on applauding you for the decisions that you are making. We could use a lot more sensible people.
Robert – again, I always enjoy your posts and feel they are well thought out. Why don't you retire now? The only thing I question, is having your personal residence free and clear. I understand all the reasons why, but I have determined it is impossible to keep a comfortable percentage of your income with the way taxes are going these days. Obviously, Texas is better than many with their lack of state income taxes. I've known too many people that have waited to retire and continued to take risks on investment or construction and find themselves taking multiple steps backward when the economy turned on them. I assure you, they wish they would've done things different when they had more options available. You always seem to have your crap together, so I'm confident this would never happen to you but I still asked, why don't you retire now? I'm not talking about a rocking chair.
Matthew – very impressive to see guys like you and Matt are planning so far in the future. It is very easy to reach goals when you actually set distinctive ones with checkpoints along the line. As I've mentioned in previous threads, at the bigger pockets summit, and also in my book, I'm not sure anyone was more goal oriented or had a more definite strategy then I had in my early days of real estate. I would have to say though, both of you may go right asked me in your accomplishments over the next 5 to 10 years.
I want to thank all of those that have mentioned their appreciation for this post. That wasn't my reason for the thread. I just find it silly the amounts that people think they need in total assets or passive income. I'm well aware that someone can spend all the money they earn. Just look at professional athletes for example. I heard a number like 70% of professional athletes are broke within five years of their retirement. How sad. I hope none of us on bigger pockets go down that same path. I plan one more post with specific numbers on my retirement. I think I have posted something like that in the past, but this will be based on my new residence in that wonderful state of California. Rich
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
Originally posted by Rich Weese:
Rob K – I really don't think the nest egg assets are as important as the passive income. I don't care whether the passive income is derived from investments, Social Security, pension, inheritance etc. I've run into hundreds of people that are retired very comfortably without a nest egg like recommended by various magazines. I assure you it is being done for less.
I agree. I was just talking about my situation. I won't receive a pension, I've never inherited any money, and I'm not banking on receiving any social security. I'm 39.
Your generation got all of the cash. Mine gets to pay the debt. :)
I'm a conservative investor and would like to have enough passive income from investments that I won't need to touch any of the principal.
Investor · Austin, TX · Member since 2013 · 452 posts · 309 votes
13y
Hi Rich Weese,
I'm going to jump in at the $12k per month in today's money as being a goal, but hear me out on why. My logic may be faulty, but it works for me. If I have too much money in my golden years, so be it. I can live with that.
There are few things I want to make sure I'm completely covered on when I "retire," which probably won't be retirement in the traditional sense. I like sitting on beaches and traveling in about 7 day increments, after that I want to use my brain and do something that matters. This could be something like volunteering or something like continuing to do things to generate more passive income or something else completely. Time will tell, but I don't plan to ever get super acquainted with daytime TV.
So, what are my things that I will continue to spend money on?
- My homestead. I live in Central Austin, and currently plan to stay here. My property taxes can go up about 10% a year until they are frozen at the age of 65. I've got 23 years until then so my "free and clear" home will never be free and clear and will always have a significant monthly payment on it. By my current calculations, this puts me planning for about $5500 in taxes PER A MONTH for my house at the age of 65. I could get lucky and this could be lower, but I'm planning for the worst.
- My partner and I eat out a lot and we like to do this. I'd almost consider it a hobby. We're a little foodie-like plus it's a huge part of our social life. I hope to not have to stop doing this.
- We also like to travel. This isn't cheap.
- I hope to always have enough money to pay for any insurance and medical issues that we might have.
- I'd like to be able to continue to support non-profits that do great work.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
13y
Rob K-I understand what you're saying.I have no pension, received 100K from parents in total when they passed (I was already retired), and took SS at 62 for a whopping $700 per month which I give away. Better for me to direct where it goes than the government. I agree your generation is getting screwed. When I first started paying into SS, there were 13 people contributing for EACH person receiving SS. Now, it is slightly over THREE. Can't continue as current for long. My goal was always the same as yours. Have enough passive income to not touch the principal which I put in Trust for grand kids and other generations.
Lynn- are you serious? $5500 per month in taxes? MOVE! I lived in TX for 2 years and loved it. Now I travel and domicile in SD. No state income taxes and lots of benefits, plus, you don't have to live there...
I enjoy the same things you mentioned like sitting on Cancun beach and 7 day trips or longer. I can't name a single daytime show. Ever thought of FL? I lived there for couple years and easy to drive to one of 4 Ports and get a highly discounted Cruise. No air fare-just drive to the port. Eat at a different restaurant every night, have entertainment and be pampered. Just teasing you as your plan is a very good one imo and I'm confident you'll reach it.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
I believe she is extrapolating 10% annual increases for the next 23 years which would double taxes 4 times. Crazy, but the upside would be a home worth @ $3mm.
Real Estate Investor · Amarillo, TX · Member since 2008 · 547 posts · 214 votes
13y
My goal and reason for investing is to be financially free in my 40's. although unlike some of the other posters who are 25ish and make $12,000 a month (what do you do!) I am in that age frame but make significantly less. I invest what I can, but currently also use income provided from my assets at this time, most my properties are on 20 year or shorter notes, therefore by the time I'm 45 I should have everything paid off and be able to live comfortably. 100k a year in today's money would be comfortable IMO. I would prefer to spend time with my family and not be required to work a 9-5. I never see me not working, just working significantly less.
8k a month should be doable on $300-400k in assets in my area.
Rental Property Investor · Roma, Italy · Member since 2013 · 63 posts · 19 votes
13y
I am 39 years old Italian men.
Internet has changed the word allowing the ideas and wealth to move fast around the world.
Bad news:a long term guaranteed income will be a dream.
Good news: the world has no edge anymore and the opportunities are available to everybody.
My goal is learning not the profit. In order to learn I have to start with easy business.
I believe the ""buy and hold" is a easiest business and the US is the easiest place to start with.
New York City, NY · Member since 2012 · 60 posts · 14 votes
13y
Chris L.
I hear you loud and clear.What i get from your experience is that we start investing, with the goal of financial independence/ retirement or whatever reason but once we succeed, we will need a greater motivation to keep investing.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
13y
Glad to be retired so can get all the way through this post. Just celebrated 1 year retired and I can say it just keeps getting better.
Have a friend (a friends aunt) who is 94 and has been retired 30 years. She said she had a hard time in retirement at first because she missed her teaching job. She said it took her a couple of years to adjust but learned that being busy is the answer to a happy retirement. She gets up at 4 am and walks 4 miles quickly at the mall, golfs every Wednesday, plays bridge, and gives dancing exhibitions with a group of women she hangs with. You can call her at 9 at night and she probably won't be home.
I have a pension that will, IMO) implode within the next 10 years. It pays gross 2k a month take home $1600. I pay myself an 8% management fee on 5 units and half mo rent when re-renting. I also pay myself 1% of my investments in stocks and fixed income. So far it has been a lot of fun working these numbers and it is working.
Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
13y
Rich Weese I'm not sure what they spend it on exactly, but I'm not terribly surprised. Travel, property taxes, airplane / boat fuel and maintenance, meals and entertainment, home improvements, etc etc.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
13y
Jeff S- Glad it is working. I remember chatting about this at the BP Summitt last March. Do I calculate correctly? You're doing this for under 3K per month? I'm going to post a new thread with my actual living expenses in my CA location . Your Aunt is my kind of girl! Rich
Steve K- I remember spending 70K in travel one year, so that can be a big chunk-and taxes.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Why do I invest?
It is satisfying to create value and get paid for it. To figure how to combine what I've learned, my money, OPM, my time and attention, to create value beyond the ordinary. To figure out what kind of investing matches up with my interests and strengths. to create something new. Something that is valuable to others.
Rich, you seem to be saying "invest enough to finance the rest of your life with passive income and then do what you want."
But you do more than that, don't you? So do many here. You are building new homes. There is an innate creativity in all of us that is exercised in various ways. Building or rehabbing homes for families to live in satisfies our need to create. And our desire to add to society.
Sure, we can live on x dollars for the rest of our lives, but should we stop creating value for our economy, society, culture, church, family, etc., because we have enough money? There are good reasons to slow down, but I'd say live your values. If your values are to _____, figure out a way to do that. It might be something that takes a lot of money or mabe no money at all.
Yes, I invest to provide for my family's needs, but I also invest because it is satisfying to create, grow, and give.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
13y
Jon K- I think my new thread on Why do I invest with retirement #'s deals with your reply. Yes, I buy lots and HAVE houses built for me on spec. It is satisfying, but my definition of retirement to do what I want to do if and when I want to. I choose physical activities for the most part, since that opportunity will eventually be less likely. I choose other things also for satisfaction. I'm speaking June 8 at a Preparedness Fair. My topic is What if? I like that type of thing.Rich
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
13y
Rich, my spread sheet says I spent $2436 per mo in 2012. That is exciting to me since I took a $42,000 cut in pay to stop working. Did not know if I could live on this type of money and am pleasantly surprised.
Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
13y
It's hard to say at age 33 and being quite far from financial independence or retirement, what retirement number I will need.
I think if I could manage to get 10 houses under my belt that rent for an average of 5-600/month real cash flow per month in todays dollars (some may be paid off, some not) and 20 years more 401K from both me and the wife and all personal debt paid off, we would be pretty good.
I suppose that would be about 5500/month from rental income plus around 1.5-2MM in real estate assets plus around 0.75 to 1MM in 401K monies.
I think the 401K monies, however we decide to invest them post 401K will provide a nice and truly passive component in with the rental money that should still increase with time as remaining mortgages get paid off. I would manage the rentals and that would be my work in retirement. I may do some other type of work if I find I spend too much money in my free time and get bored otherwise.
I think being a Walmart greeter would be a nice and stressless retirement job to pay for my coffees and sandwiches. Maybe a plant waterer at a botanical garden...