How Much Should I Save For Retirement?
Welcome to REI TV, here’s the question today! How much money do you actually need to save for retirement? Well frankly it depends, if you’re talking about traditional means the stock market versus real estate, there’s a huge discrepancy in the numbers.
So, let’s address society’s traditional approach to retirement first and just to ask this question. How much do you actually need to save for retirement? Well the answer to that question is also partially going to be
a function of how much cash you want. Because at the end of the day you’re gonna do something to take that lump sum of a money and try to leave of the interest without depleting the principal or the lump sum amount which you’ve actually saved.
So when it comes to retirement planning your financial planners usually gonna reference in the annuity world what we call a 4% rule. And the idea is when you wanna retire take all the money you saved and put it something called annuity which will be diversified throughout the stock market and they’re gonna try to pay you annually somewhere around 4%. So for example, if you gave them a million dollars then the interest each would be about $40,000 maybe around $3,000 a month.
So let’s say that were actually gonna rely on this 4% a annuitize rule. We’ll let’s say that you wanted a very basic retirement of 60,000 dollars a year, 5,000 dollars a month. I’m not talking about social security. How much money would you have to accumulate to have it, you know every year payout of 4% dividend that would give you at least 5,000 dollars 60,000 dollars a year. We’ll this is kinda surprising. You would need 1.5 million dollars. Now just think about that for a minute. Do you know somebody that in there career at the rate that they save has a plan were they could actually realistically put 1.5 million dollars away. I mean were talking about, that’s the 1 percentage in America that’s not the masses, that’s not the 99%.
Here’s the bottom line, savings alone can’t get us there. So if you’re contributing to a 401(k) ??? trying to pay off your house, fast forward and do the math. Are you going to arrive, are you going to have enough based of the information I just shared with you. And if the answer is no then it means that, that system for your situation is broken which means you need to look for a different system, not getting a second or third job.
So there is a legitimate shortcut that, by the way, the wealthy used all the time so that they can overcome this hurdle – and that answer is Real Estate because if you correctly treasure hunt the right kind of Real Estate deal. If you got philosophy, strategy and system that I am always talking about, then you can advance yourself a decade with each deal. What do I mean by that? Well, look at first house that I bought. I bought that house for $110,000 and it was, at that time, worth $150,000. They are a $40,000 discrepancy that was more than double in what I made in an entire year at my job. So, all of the sudden, just by walking in and closing on that house, my net worth, did what? Well, it went up $40,000 a year. That also translated into cash flow for me later when I moved out of it. I have $550 month cash flow on it after taking out a lightly credit on the house to buy my next property that would pay me another $500 cash flow but that house had more than $50,000of equity. So between those two houses, what is that? Well, I bought this one with $40 and that one $50, that’s a $90,000 of equity.
Let me ask you, how long would it take for you to save $90,000? And then how the cash flow between the two have over $1,000 a month. Wow, that’s amazing! That’s something annuities, the stock market cannot do for you and that’s just another reason why I love Real Estate.
So at the end of the day, my friends, it has nothing to do with how much money you save. Stop living in fear, stop living in scare city, it’s not how much you save – it’s how many homes you need to buy to get your retirement. And with a careful plan, it’s strategizing and buying a few homes the right way that can catapult you to a retirement for the next 5-10 years.
Thank you so much for watching, this is Kris Krohn signing off. Don’t forget to subscribe. And remember “Knowledge is Power!” and then when you take that knowledge and apply it, it’s even more powerful! So go ‘Rock It’ in Real Estate.