Retirement Planning without 401(k)/IRA

[Samuel Mutschler]

Long time listener, first time caller. My wife and I own a two properties and just completed our first Live-in-flip. I'm in the military and put 6% into the Roth TSP (similar to IRA but deposit limits are higher). My TSP will continue to mature until 2050 but I don't plan to make any more contributions starting soon and use that money towards purchasing the next property. We also have a solid chunk in the stock market we are strategically liquidating to use towards hard, cash-producing assets.

My question is: How are people saving for retirement without making contributions to IRA/401(k)s? Our plan is to continue growing our real estate portfolio to have a majority of our cash flow from passive income. I don't have much faith in IRA and 401(k)s especially watching our parents stress about the value of their retirement funds right now because they are retired now or in the next few years.

[Daniel Murphy]

Saving for retirement is mostly just a fancy way of saying "I'm buying some assets".  For most of us, we buy stock market investments for a number of reasons.  For Real Estate investors, you're buying assets as well. So you are still "saving for retirement" by growing your real estate portfolio. 

Personally, I wouldn't shy away from the stock market because of the current funk it's in. It will always be there. Investments will grow long term. The stock market plays it's role for certain.  Real Estate investors are a different animal from most other investors though... 

[Steve Vaughan]

I contributed very little into an IRA ($1800/yr) and nothing into social insecurity over the last 21 years when I became a f/t REI. But I am strange.

I purchased 3 dozen rentals instead. Paid most off, sold on mostly interest only contracts last year that pay monthly interest and will provide periodic large balloon waterfalls in years 3, 5, 7, 10 to redeploy along the way.  

I won't be able to take social insecurity until at least 67 because of the if you make more than a pauper ($22k?) on the side 50% penalty before then. By the time I get there, 'retirement age' per SS will likely be 70.  Whatever. 

I am not an advocate for maxing retirement and HSAs your whole life.  If you're FI in your 40s, you’re screwed. 

I break down I will get or I will need $× in social insecurity or pension arguments per month into rental units. It's usully like 2 or ridiculously easy to attain other ways.  Different perspective @Samuel Mutschler

[Jeff Nash]

I suggest you just maintain a healthy balance of the 3 tax buckets of money: tax deferred, tax free and taxable. Outside of the stock market, you can get creative and partner with others on real estate deals or do it on your own, get into syndications. public and private REITs, trust deed notes, structured notes, commodity future and options, etc. Me and @Denver McClure focus on these types alts.  Depending on someone’s situation, risk tolerance, or investment appetite they can diversify in the tradition sense with stocks, ETFs, and bonds or mix in real estate and these other asset classes. You just do what you can as you grow your wealth over time. 

 

[Carlos Ptriawan]

Quote from @Samuel Mutschler:

Long time listener, first time caller. My wife and I own a two properties and just completed our first Live-in-flip. I'm in the military and put 6% into the Roth TSP (similar to IRA but deposit limits are higher). My TSP will continue to mature until 2050 but I don't plan to make any more contributions starting soon and use that money towards purchasing the next property. We also have a solid chunk in the stock market we are strategically liquidating to use towards hard, cash-producing assets.

My question is: How are people saving for retirement without making contributions to IRA/401(k)s? Our plan is to continue growing our real estate portfolio to have a majority of our cash flow from passive income. I don't have much faith in IRA and 401(k)s especially watching our parents stress about the value of their retirement funds right now because they are retired now or in the next few years.

 There's one thing you're missing.
Both home prices and 401k/stock index if 100% put into S&P500  are actually following money supply rate from long term perspective.

So question is, if you don't have 401k, can you exceed the appreciation of money supply ? yes, by investing in appreciation city.
Where ? in last 10 years, the most appreciating state is CA,Hawaii and WA.

So if you buy in cash-flow location, then you would lose money, and better invest at 401k.
But if you purchase in Hawaii, then you can forget the 401k, and just enjoy the unlimited appreciation that exceeds money supply rate.

[Scott Raitt]

Quote from @Samuel Mutschler:

Long time listener, first time caller. My wife and I own a two properties and just completed our first Live-in-flip. I'm in the military and put 6% into the Roth TSP (similar to IRA but deposit limits are higher). My TSP will continue to mature until 2050 but I don't plan to make any more contributions starting soon and use that money towards purchasing the next property. We also have a solid chunk in the stock market we are strategically liquidating to use towards hard, cash-producing assets.

My question is: How are people saving for retirement without making contributions to IRA/401(k)s? Our plan is to continue growing our real estate portfolio to have a majority of our cash flow from passive income. I don't have much faith in IRA and 401(k)s especially watching our parents stress about the value of their retirement funds right now because they are retired now or in the next few years.

Keeping it Real...Estate. Rentals to supplement your retirement income are an obvious option. But if you haven't done enough to afford a comfortable retirement because have worked so hard to have multiple homes; then a reverse mortgage on a primary residence is the other way to use real estate to support you in the retirement years. 

Reverse mortgages are not a dirty word anymore with the options available now. Income and Credit aren't the focus either - they help and give you access to more of your equity but not essential - essentials are age at entry - Min 55, (62 for all options) and a ton of equity in your primary residence.

All the best

Scott Raitt

[Chris Picciurro]

Understanding tax free vs. tax deferred is important. Nice job putting money into the Roth. It is a common understanding that tax rates will increase in the future so don't stress about pre-tax contributions to an IRS or 401k. Having income producing real estate assets is a great way to set yourself up in retirement. 

[Peter Mckernan]

Quote from @Samuel Mutschler:

Long time listener, first time caller. My wife and I own a two properties and just completed our first Live-in-flip. I'm in the military and put 6% into the Roth TSP (similar to IRA but deposit limits are higher). My TSP will continue to mature until 2050 but I don't plan to make any more contributions starting soon and use that money towards purchasing the next property. We also have a solid chunk in the stock market we are strategically liquidating to use towards hard, cash-producing assets.

My question is: How are people saving for retirement without making contributions to IRA/401(k)s? Our plan is to continue growing our real estate portfolio to have a majority of our cash flow from passive income. I don't have much faith in IRA and 401(k)s especially watching our parents stress about the value of their retirement funds right now because they are retired now or in the next few years.

There is a mentor of mine that grow a lot of his cash he uses today in a 401K tax deferred then moved it over when he was older to a self directed IRA which he uses today to buy a lot of properties. During the time he was young he had other means to buy properties, and at retirement he has a lot of money to throw around at properties for more cashflow. By the time he retired he saved a lot and had sub ten properties (guesstimate) in his name as rentals, but a lot of money in 401K to do stuff with.

The other mentor I had only had about 200K or so in retirement funds and did more investing in real estate prior to retirement. When he was of age he cashed that money out to do more flips to buy more rentals after the large cash infusion of the flips. This mentor has multiple properties that are in the teens, and a lot are paid off. 

These two people worked hard and did a lot of real estate, and the one that did not put as much in the stock market ended up with a higher net worth along with cashflow. This is an observation and I do know a little bit deeper on their numbers but will leave those out of the conversation for sensitivity purposes. 

Overall I would say property purchase and real estate will set you up for a more fruitful future, but I would still put a little in an account to use as self directed in the future, or cash out when you can to deploy on paying off a rental or buying more when you are of age.