Have You Saved Enough For Retirement?

The NPR podcast¬†Make Me Smart caught my attention earlier this week with their episode You Can’t Really Retire With A 401k Alone.

The mortifying information shared by their guest,¬† labor economist Teresa Ghilarducci of the Schwartz Center for Economic Analysis was that 90 percent of all Americans don’t have enough money saved for retirement. In fact, according to Ghilarducci, in order to maintain a middle-class lifestyle, a person should have a minimum of $1 million dollars saved in their retirement account.

Pew Research Center defines the middle class as those who earn between $46,900 and $140,900 per year.

Using the 4% rule, which is a rule of thumb that dictates how much money you can safely withdraw in retirement and still preserve your principal, that suggested $1 million of savings in your retirement account would generate an income of $40,000 a year; not counting any income from social security or real estate investments.

Cash-flowing rental properties are an excellent way to supplement retirement income without having to have another million dollars in savings. In fact, given a rather conservative cash-on-cash return of 9%, a retiree would be able to achieve the same level of cash flow with a $445,000 investment. With higher rates of return, the amount of equity needed declines.

And that is before the additional contributions to wealth made by principal paydown, tax savings and appreciation.

Yes, real estate can take a bit more work than simply depositing money in an account. However, there are ways to simplify.

Call me if you’re interested in learning how you can grow your retirement income – without having to save a million dollars first.