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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today by going to Amazon or go to www.howtoretireontime.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much discuss whatever's on your mind. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my colleague, mister David Franson. David, thanks for joining me.
David:Hello.
David:Thank you. Glad to be here.
Mike:David's gonna be reading your questions, and I'll do my best to answer them. You can send your questions in anytime really during the week by texting them to 913-363-1234. Again, that number is 913-363-1234.
Mike:Or email them to hey mike@howtoretireontime.com. Let's begin.
David:Hey, Mike. What is the best way to invest in real estate for retirement income?
Mike:Okay.
Mike:So when you are retired, it's a wonderful asset. But here's what I'm guessing the person's really asking is, I'm about to retire. I've got a bunch of assets in my 401 k. How do I get into the real estate game? Because I follow someone on YouTube that says real estate is the best that way.
Mike:I've heard that that quote that real estate's made more people millionaires than any other thing. There's no such thing as a perfect investment product or strategy. Nothing does everything well. And you need to understand, 1st and foremost, what the Dunning Kruger effect is. The Dunning Kruger effect is a psychological phenomenon for all humans.
Mike:There are no exceptions to this that suggest that people that lack experience overcompensate or overestimate their own abilities. So the reason why I'm bringing that up is if you have not been a landlord previously and you're now entering retirement, you probably don't want to become a landlord now because there are costs associated by the mistakes that you will almost inevitably make as you enter into a new space. So be very careful. In my mind, real estate is a wonderful game for those who are investing in their twenties, thirties or forties, and maybe even early fifties. Hopefully, most, if not all of your mortgages paid off.
Mike:So you have more cash flow in retirement and that you have that that more freedom, whether you're gonna manage it yourself because the mortgage is paid off, there's better cash flow, maybe you have a company manage it. But you gotta you gotta understand what you're working with. If you want real estate as a part of your portfolio, maybe consider REITs instead of being a landlord yourself. Because a couple of mistakes can be very costly. And that's that's just my concern.
Mike:What's the best way to invest in real estate for retirement income? If you have real estate experience, then look in real estate. Look what you're already experienced in. But don't start something new right when you retire. I don't think I can say that a better way.
Mike:What do you think, David?
David:Yeah. No. That that makes perfect sense to me. Yeah.
David:There's there's no reason at this stage of life to maybe do something like that. I mean, if you wanna learn to play guitar, that's probably Yeah.
Mike:That's a good one. Learn a new language. I don't know.
Mike:Something something else. Yeah. I I get people want control. I get that people don't wanna hand it over to a professional that could potentially screw it up, and that is a risk. But I heard, about someone, not a client of mine, but I heard the story recently where they took a $1,000,000 from their 401 k, paid the taxes, and bought 3 rental properties, and they bought them in poor neighborhoods.
Mike:They bought them without fully understanding how to how to manage them so they weren't valued correctly, and they're not cash flowing now. So he took a huge tax hit and now is struggling to make these three properties profitable. Ouch. And he didn't know what he was doing. And he thought he was.
Mike:He was sold the idea. Right. Through someone. So you can you earn it back through depreciation of the properties. Well, you don't want to start at a loss and try and make it up through a tax benefit.
Mike:That's not enough of a benefit to rationalize the endeavor. Stick to what you know, especially on these big things. It's okay to maybe learn about new stocks and invest in those because you can get out of them quickly. Yeah. It's difficult to get in and out of real estate quickly, especially with all the costs associated with it.
Mike:So, if you want real estate as a part of your portfolio, consider maybe privately held REITs or just not altogether. Yeah. That's my answer. If you want more information, if you have real estate in your portfolio, you want a a better understanding or an analysis on, hey, are my properties profitable or not? I I can't tell you how many times a real estate investor will say, yeah.
Mike:I'm getting 5, 6, 7% on my properties. And I look at the numbers and they're not calculating them based on actual return on investment, net of all the costs and and things that are going on there. They skew the numbers to make themselves feel better about their investment. It's a bias. And we break down the numbers, many times it's they're getting, like, 1, 2 percent on their investment.
Mike:And that's not competitive. You don't want to stick with investments that are not competitive. Sometimes it's time to sell. So if you want that kind of conversation, if you want to really dive into the quality of your current real estate portfolio and to explore other options that are out there, go to www.yourwealthanalysis.com to have a conversation. That one would be with me.
Mike:I I do the real estate conversations here. So you'd visit with me. We talk about your current portfolio. We talk about your lifestyle legacy plan, and then we would talk about what options you have moving forward to support the lifestyle that you wanna live and the legacy you wanna leave in the most tax efficient and effective way. Go to www.yourwealthanalysis.com to request that at no cost to you.
Mike:That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility.
Mike:This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.