The Terrifying Truth About Retirement 

I know your secret about retirement, at the end of your career that you step into after years and years and decades of hard work. 

Yes, retirement, you have a secret about it and I know it and that secret is that you are not ready for it if you are like most Americans. If you are relying on a 401K and IRA, and if you even still believe that social securities are going to survive for you, then you are not ready and you have not saved enough. 

So how do I know this? I know this because nearly the whole country is not ready for retirement both financially and strategically. Not only that, but Americans actually know that they’re not prepared for retirement. 

Multiple recent studies where they interviewed Americans across the board had the interviewees admit that they are not prepared and they fully know it. 

Shockingly, the most common case in the past was it wasn’t uncommon for people to only really work for one or two companies throughout the entire course of their lifetime, and from there, after let’s say 30 years of working for the same company, they had a pension to fall back on and what the government did at that time is they provided a backup option for people that did not have an organized pension in place and that was the social security system that we have today. 

However, the entire system has changed in the last several decades and now with the rise of things like 401ks and IRAs, you’re seeing the old-school pension system go away for the most part. Additionally, you’re seeing people work for many more companies, meaning that their tenure with one company is typically much shorter. 

So, those incentives that employers previously offered for long-term employment with that company, you’re not really seeing those as much anymore. Meaning the employer options for retirement have dwindled quite a bit. All of these factors are what contributed to the rise of the more popular programs like 401ks and IRAs, and investment retirement accounts. While the emergence of these new types of accounts did give people more flexibility for retirement and options in how they’re going to invest their retirement savings, the reality is that companies also really liked these plans because they let them off the hook for more long-term obligations such as the pension plans that they had previously and in the wake of the baby boomer generation, which is the largest generation that we’ve seen in history, this legion of retirees that would not have to be put on pensions were a huge benefit to companies. 

Many employees also like the benefits of these programs, most notably the flexibility because they can move between employers and choose what specifically they are going to invest in, and at the end of the day, it does allow people to have a stake and a choice as to what assets they believe they should be living off of for the golden years of their lives. And this does hold a lot of benefits for employees, especially when many companies actually will match a portion of what the employees contribute to their retirement accounts. 

For example, if you divert, let’s say 5% of your income towards your 401k, it’s not uncommon that your employer might match that up to 50% of what you’re investing into your retirement account, and on the flip side, it’s a benefit for employers because typically these benefits click when the employee has been employed with the company for a certain period of time, which gives the employer more stability in their workforce and those extra perks also keep employees happier and keep morale higher knowing that employee with the company is long-term, they’re happy and they know the company’s taking care of them in retirement. 

Unfortunately, even with the advantages of all these new retirement processes and strategies and accounts, it is not enough to sustain you more than likely in your golden years. 

In 1960, the average life expectancy in the United States was just under 70 years old. That means if you worked until the traditional retirement age of 65 actually didn’t have to save that much to support yourself for the last five or so years of your life and while that statistic might be extremely depressing to think that you work your entire life and have just five years of retirement to relax after your lifetime of hard work but it also paints a really good picture of how the retirement system in the United States was designed because there wasn’t a long period of time between the point that people retired and the point that they passed away, the employer-sponsored benefit programs did not actually have to fund that much of a person’s lifespan. 

Now, here’s some interesting data about the United States today. The average lifespan today is 77 years old in the US. But if you dig a little bit deeper into the data, you’ll see that for people that live to the average retirement age of 65, the average life expectancy is actually 84 years old. That’s because the overall average is reduced greatly by those that passed away before that point in their lifespan. 

So that last point is extremely important because now what we’re understanding in the US is that people actually need to support themselves for 19 years on average in the retirement phase of their lives. That number obviously is almost four times as long as it was in the past and not only that, but the systems like pensions that we had in place previously are not there. So now more than ever, it takes strategy to make sure that you are covering yourself in retirement. 

How much money do you need for retirement? 

While there’s no hard and fast hundred percent answer for any of this, we’ll start with the standard advice that the financial industry gives you today. 

Most financial advisors say that for retirement, you should be planning to save 10% to 15% of your income on an ongoing basis. That seems pretty reasonable and achievable, 10% to 15% of what you make. But what are the underlying assumptions behind that 10% to 15% that they’re advising? The first is that you begin this in your twenties and that you maintain this throughout your entire life, that you never have massive bills that you need to cover like the birth of a child or a medical emergency or some huge fix on your home that you need to take care of. It assumes that you just started investing at 20% and then invested that same 10% to 15% for your life until retirement. 

The second assumption that they make is that you invest that money well and that you never lose money, meaning that there are no huge market corrections like we’ve seen so many times in the last couple of decades, that there are no financial crises, and there are no huge asset issues with the assets that you chose for your retirement plans. 

All in all, it’s a big assumption and if you dig deeper, the numbers actually get a little bit scarier in that column of assumptions. The third assumption that this model makes is that you never have a disruption and that your income is essentially stable over the course of your lifetime.

So there’s some good news in there’s some bad news with this piece. The bad news is if you have huge periods of time where you’re unemployed, this whole model goes completely out the window and it is not a good fit for you to model your retirement after. The good news is if you’re exponentially growing your income throughout your career or you’re getting, let’s say huge paychecks or huge bonuses or huge commission checks, that if you dump that into your retirement savings, that you actually are getting way ahead of your retirement planning, that the future is safer and more secure most likely. 

So let’s break it down a little bit. The first step in retirement planning is to calculate how much you need. This will be determined almost entirely by what you plan to do during retirement and where you plan to do it living a life full of lavish traveling and luxury apartments in downtown Manhattan is going to cost more than retiring to a rural area and having a few apple trees and just keeping it real simple, but also keep in mind that some of your retirement plans might actually include some sources of income, like let’s say if you really enjoy investing or you’re doing some things on the side to make a few bucks. 

But the number one thing is to plot it out and run the numbers on what kind of life you want to have and how much that life is going to cost on a monthly basis. For now, don’t get overwhelmed by the numbers, and instead, commit yourself to running these numbers fully. There are a lot of amazing tools out there right now like retirement calculators that really give you a very good drill down on exactly what you need to calculate. If you want some loose math on how much your living expenses likely will be in your retirement age, if you want some loose math on what your expenses will most likely be in your retirement era, you can loosely use the number 60% to 80% of your pre-retirement income as a pretty good peg for that period of time. Once you identify how much you’re gonna need on a monthly basis, it’s a process of working backward to understand and appreciate your assets from where they’re at today, what they’re going to appreciate in cash flow all the way to the point of retirement, and if it will sustain you then. 

This is one of the major reasons that I like real estate, specifically income funds, because at the end of the day, that income you can rely on every single month, and it’s not subject to the turbulence of things like the stock market. As much is also worth keeping in mind, if you pick assets strategically, you have not just the cash flow and appreciation of those assets, you also have the money that you make when you sell those off. 

Meaning that if you invest in assets that have cash flow and appreciate most likely over a long period of time, or you invest with people that are investing in these types of assets, you have multiple opportunities for income and value. It’s not just the cash flow you’re receiving or the appreciation you’re receiving. You also have the money that you receive when those assets are sold off. 

This really, in my opinion, is the core of the retirement strategy, and it’s that the IRAs and the 401ks are massive opportunities for you to build a nest egg and strategically plan for your golden years. But the reality is they are not enough because if you do the math, even with employers contributing with social security, if it’s around by the time that you retire because they’ve been saying for years that social security might go bankrupt, even with all of those things in place, the reality is that you must have assets and you must have cash flow outside of the standard programs that exist today. For, when I ran my numbers, it made me even more confident that investing in real estate was the best path for me and my retirement. But the best question that you can ask is, what should I be doing right now to plan for my retirement? 

While I’ll leave the definitive answer up to you and your financial professionals, in my opinion, the best thing you can do is everything and that means maxing out the IRA, maxing out the 401k, and investing in assets strategically that have a long-term value, that offer cash flow, offer appreciation, and offer money on the sale of those assets. Retirement is actually an extremely important topic, and there’s no way that we could cover everything in one video, but we do have a newsletter that covers all kinds of amazing investment discussions ranging from retirement to real estate, to all kinds of different strategies that exist out there today. 

Additionally, one of the most important things you can do in retirement is to understand your cash flow situation and the absolute best cash flow opportunity that I have personally found is the income fund, investment model.