Changing the Retirement Mindset

20 Replies

How does one get past the idea of NOT having a traditional retirement account and into the mentality of leaning on rentals to consistently bring in cash flow? Grew up in a traditional household and trying to break free of the panic that sets in realizing I won't have actual retirement bank account with cash in them but will have assets that churn positive cash flow. So scary emotionally even if logically the moves totally make sense! 

@Kayla Elliott

I suppose you just have to ask yourself if you trust the government or yourself more when it comes to funding your retirement. Social security is a joke and it’s getting worse. Meanwhile the cash flow from my rentals/small business is getting better and better.

@Jerrad Shepherd

This is true... and my answer is definitely that I don't trust the government to always act in my best interest. That being said, I don't totally trust the stock market either. Still something tells me that not having ANY money at all in a traditional retirement account is not right. Maybe that's just a product of my parents :)

@Kayla Elliott

The advantage of Retirement Accounts is tax-sheltering. When you put money in to a tax-deferred IRA or 401(k), you can reduce that income from your taxes, allowing you to put more in the plan than you could take home personally. In a Roth account, you are taxed on the initial contribution, but all growth you create is tax free.

The growth the plan receives over time compounds the tax-sheltering, as the investment gains are not eroded each year by taxation.  So, over time you accumulate a larger pile of savings.

This concept of compounded tax-savings is a very powerful principal and something you should be sure to investigate further.

Here is the kicker. IRA and 401(k) plans are not limited to investing in the "traditional" stock market. You can use a self-directed IRA or Solo 401(k) to accumulate tax-sheltered retirement savings and then invest in a whole host of assets beyond just what Wall St. sells. An IRA can invest in rental properties, private mortgage notes, stock of privately held companies and a host of other opportunities.

So it is not an either/or, you can have tax-sheltered vehicles and be truly diversified and invest in what you know and understand.

I agree with above.  And in my case, I've got a small pension, 401k, IRAs and real estate.  My thoughts were at least 1 isn't going to pan out so I needed a back up and then a back up for the back up.  My goal is to replace 1/2 my W2 monthly income with rental income by my retirement.  And I should be able to replace all my W2 income with retirement savings (mix of my pension, 401k and IRAs).  That's my goal at least...

@Kayla Elliott

My advice to you would be to not paint yourself into a box.  Leave as many options open to you as possible.

The main thing is that you have the knowledge available and at your disposal.

Whatever your choice is just own it.  I have a suspicion that you are afraid that in 30 or 40 years you will regret your decision.   

I will tell you that in life you are never going to be able to control everything and sometimes you have to take calculated risks based on the information you have at the time.  

I wish you all the luck in your future decisions!!

@Kayla Elliott

I'm in the same boat as you. I currently put 15% into 401k, but I'm thinking about cutting my contributions down to the minimum my employer will match (7%), and put the other after tax 8% into a savings acct for my next property. I just feel like I'm hoarding money in 401k that I can't do much with for a long time.

This way I take advantage of my employer match, plus save more for my next RE deal.

I used to feel the same way, especially about earning a living.  How is it possible to be paid without a w2 every 2 weeks?  I've always exchanged time for money and couldn't see any other way to do it. My family and everyone I knew had a job or career. That was 17 years ago.

So I've now not had a 401 or contributed to social insecurity since 2002.  My SS benefit estimate when I turn 60something is 3 digits.  Not even as much as a single one of my dozens of units. And my unit cf rises faster than inflation.

Divide your retirement dollars + healthcare need  per month into units rented out.  I heard of a guy sticking out a miserable post office job in a place he hates for 3 more years to get his $2500 monthly pension.  Other stories, too, like military personnel. 

To me that's 3 or 4 paid off houses or about 12 with payments. I'd rather be free and figure out how to obtain the assets to earn a given cashflow, but it took time to get there mentally. You'll get there too if its important enough.  Stay active on BP and keep saving and learning! 

I think you should do both.... I’m going to get a lump for my pension. Purchase a annuity with part of it...., 2000.00 a month SS, 1000.00 a month cash flow off my 4 flat, 401k savings. My wife will continue to work and save in her 401k! May pick up another rental along the way. Should have a nice diversified stream of income. May even sell my house and move into one of my units and travel! 😀

@Kayla Elliott Stocks can sound appealing , retirement income the 4% withdraw concept.  I read the book by Kiyosaki Rich Dad Prophecy, while I don't know if thats true, on the surface it sounds appealing with the semi hand off approach and click click sell if you need money. 

RE is a semi passive business when you are managing ( acquisition , rehab modes are going to require more time and attention).  But come the 1st of the month XX people are responsible for sending in rent , spread across multiple properties  , you can diversify different markets.  Rents will typically rise over time, as will asset values.  Make sure you have a good grasp on inflation , beating inflation, arbitrage on fixed debt.  These are all ways to make gains in RE.  And you can always learn. 

There are investments in RE that can be more passive typically for a little lower return.  

You have a level of control when you do your own deals .  

I know there are people who are smart and successful with stocks, im not one of them.  Im all in on real estate, all income is derived from some form of real estate rental.   The other concept scares me BUT i think its important to evaluate all investments so you understand WHY .  Im sure if i spent the last 12 years learning stocks and playing that game i would be comfortable with it. 

Also, i think one of the things with RE when you are actually healing involved in all of it , i feel you need those higher percentage returns so just learn, do the right deals, grow.  Don't go through all that, and risk your own capital for like 7% .  The growth can compound and then the magic happens. 

Much to our family's disappointment we were crazy enough to do the proverbial blood sweat & tears of REI for 35+ years...we only did the traditional IRA/401(k) solo's etc for tax deductibility & reinvestment purposes. We retired very early & yet my BIL (65) just sat down with us & comisserated that after many years of high incomes, world travel & a financial advisor they cannot afford to retire.

So I thought this was an interesting eye opening article for this discussion....


 @Kayla Elliott go for it, the returns can be exponential.

@Kayla Elliott I see investing in stocks or anything else as just another tool or Avenue for more income streams.  

Everyone breaks down each rental property as a separate stream of income. But so is each separate stock that is purchased.  Own 10,000 coke stocks that pays dividends is just a new income stream.  It won’t appreciate in value but it will give you some money. That’s just one example. 

Think of each way of making money as a tool in your tool belt.  





Mutual funds



Social security

Flipping homes

That’s just the thjngs I can think of off the top of my head. Your only limit is your imagination for earning retirement income or just living income now. 

I currently own some rentals, 401k, stocks, bonds, and maybe SS when I turn old enough.  

Hey all, 

Thanks for the input! I think the key takeaway is that I want to merge the strategies by buying real estate in a Roth IRA. I am aware of the tax implications of the different accounts, however I will definitely be making more money in the future (or so I hope). That being said, it makes more sense to pay the taxes now and then grow the money post-tax. I think just taking the steps to recognize that logically, I need to be comfortable with sticking with the best decision for me and not taking what people say is the right decision.

Any ideas on how to stay true when seemingly most of my friends are not into the same lifestyle? 

@Brian Eastman Hi Brian, I agree with your outlook. I'm self-employed as a property manager and I opened a HSA account in 2017. In addition to my HSA , I also have Traditional IRA and A SEP-IRA. I fully fund these through my job. I bought my first rental property this year in March and it is rented. My question is: am I better off paying down the mortgage before retirement or to put the extra cash flow from the rental into my IRA's, HSA or Taxable Brokerage Acct?

Originally posted by @Adam Batcheller :

@Brian Eastman Hi Brian, I agree with your outlook. I'm self-employed as a property manager and I opened a HSA account in 2017. In addition to my HSA , I also have Traditional IRA and A SEP-IRA. I fully fund these through my job. I bought my first rental property this year in March and it is rented. My question is: am I better off paying down the mortgage before retirement or to put the extra cash flow from the rental into my IRA's, HSA or Taxable Brokerage Acct?

The age old question.  I swear it is always the same.  It depends.  

So when you are in the “growing” phase you want to be able to take any profits (cash flow) and reinvest it into more properties. Once you hit the number of properties you want then you change into pay down mode.  After it’s all snowball’ed paying debt down and do that until you need the cash flow.  It’s all balance.  It’s super dependent on your situation.   For me I want as fast as I can growth in number of units until I hit my number then pay off one at a time until my cash flow replaces my income so I can quit my day job and enjoy life. 

@Eric C. I think that is a HUGE factor in planning the future income streams as just that - streamS. Having multiple income streams from multiple vehicles I am finding, is very important to me. For instance, having a Roth IRA that is generating income from a real estate fund as a single stream of income. Our duplexes with cash flow as another stream of income. An employer-funded 401k for growth through mutual funds as a third stream of income. And then various side-gigs as multiple other streams of income. They are a mutually exclusive and are all growing at their own pace and that stigma that I have is starting to fade.

@Kayla Elliott I have a 401K but don’t plan on using it for retirement. If I’m in a position that I need it when I’m 65, something went wrong. By that time I want to be living off my real estate portfolio 100%. My employer matches my contributions. So not contributing is like leaving money on the table.

Originally posted by @Kayla Elliott :

@Jonathan Hulen that's awesome congratulations! What does your real estate portfolio consist of at the moment? and what's your plan to grow it to where it needs to be in order for you to retire?

At this moment 0. I sold a duplex last October that I had for 5 years. I'm using the profit to purchase out of state. I have an offer in on a Tri-Plex in Indiana that looks promising. I'll know if they accepted the offer on Tuesday...I plan to BRRRR my way to 10 properties with 30 year fixed loans. Then move to larger commercial buildings. Using the BRRRR I'll try to maintain as much capital as I can. My ultimate goal is $15,000 a month cash flow.

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