I got started on this in another thread. How are you guys planning on financing your retirement? I’m thinking about this more since my body is not responding as well to the abuse as it once did.
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At this point I`m still hoping to hit the lottery!
J. D. Reynolds
Home Improvements
"DO IT RIGHT, DO IT ONCE"
This goes back to the "C" Corp or "S" Corp thread.
I have a Simplified Employee Pension Plan ( SEP ) which allows
me to put away 15% of my salary. I had to work up to that by increasing my contribution a percent a year until I got to 15%.
That made it pretty painless. I'm pretty much where I want to be at age 45 - I still have a lot of years to fund it.
Rental property and a small farm will round it all out. I keep kicking in even though everything sure has been flat for two years.
Greg.
Explain flat Greg.
I got worried at age forty, that I didnt have a retirement. So , I have been collecting rentals. the thing about that is that they take a lot of time to handle them and work too. you better like working weekends if you pick them. Funny thing I dont understand; big companies are struggleing every where since sept 11, but I can no longer buy repos at my price. Im being forced back out in the field , because the money is much better than it was 10 yrs ago. So maybe I can save some money. I think about it almost every day. Ive always had a fear of starving and Im still a good looking fat boy in overalls.
I really thought this would be another one of Ajs posts , or I thought he would already be here. Yall,............................
be listening for him as he will be comming down the hall any time and answering this post.
Tim Mooney
Tim,
When I said "flat", I meant the stock market and investments in general. I've said before in this forum that my rental property is at it's best in times like these. The tenants are paying me the same monthly rent that they were two years ago - it's not tied to the Dow or S&P 500.
It's all been quite a learning experience for the last two years or so. I guess it's blind faith that keeps me sending in checks every month - no, wait . . . that's what we're supposed to call "Dollar Cost Averaging"
Greg.
For 90% of us old carpenters retirement is not an option........just buy a lighter hammer and keep on truckin.
Retirement plan?
Simple.
Don't plan on retiring.
The truth for me is some savings (not enough) and a few rental properties.
The big drawback is if something happens to me, it would be difficult for my wife to manage the rentals. She would most likely have to liquidate them and lose the monthly income.
I really can get paranoid about how my wife would be able to get by with what little life insurance I have and what assets I have accumulated.
TLE
If you are a sole proprietor, your best bet is a SEP inside of a Keogh Plan. Starting this year, you can set aside the lesser of 20% of your net or $40,000. I'd recommend setting it up with one of the big discount brokers, like Schwab, Fidelity or Vanguard....very easy to do. In addition, you may contribute up to $3,000 ($3,500 if 50 or older) each year to your IRA or Roth IRA, as long as you (or your spouse) has that much in earned income.
I know this may sound funky, but make sure you pay your self-employement tax each year so that you will qualify for Social Security. I fear that for many builders, SS and a wife's pension may be about all they have in their retirement years.
BruceM
Uh, ..... Bruce, what do you do for a living?
Or maybe you worded something incorrectly in your post.
Based upon what you did post, I'm not sure you should be working with a discount broker like Schwab or Vangard.
And you certainly should not be passing out retirement planning advice.
"An SEP inside a Keogh?" Making contributions up to $40,000 and funding a traditional or Roth in addition?
Hey, if you are able to put away the percentages you claim, all the more power to you. If the purpose of your post is to encourage others - great. But for your own piece of mind, I'd skip the TurboTax and contact a real CPA to review your filings just to be sure you haven't crossed the line. The penalties for doing so can get big.
I have nothing to base my comments on other than your post. But that post scares me.
You see, I'm a Certified Financial Planner and I know what you posted is not completely correct.
Ahh, thinking about the golden years of retirement Grantlogan?
I started a modest retirement program when I was in my 30's. It was going well, but alas, the stocks have not been kind in the last two years.
As boomers reach that advanced retirement age, I suspect the stock market will not be kind again. You better have a backup plan, or be prepared to enjoy your life of poverty.
I used to thnk that I'd simply keep working. I rationalized that I'd be able to supervise a crew even if I couldn't swing the hammer anymore. I also figured that my modest retirement plan, coupled with Social Security would provide me enough basics to survive. I can deal with survival. But my views are very selfish. With age, and the accompanying wisdom, I realized that I was dooming my faithful spouse to a life of poverty, even though we had not discussed this issue together. As I thought about her efforts to raise the family as I earned the income, I realized that I was letting her down by not providing a confortable retirement for her. Did she know that she was doomed to a life of poverty after I laid down the tools?
About a year ago, something changed my viewpoint. It was a book called the Cashflow Quadrant by Robert Kiyosaki (Robert is the author of "Rich Dad, Poor Dad"). This fascinating book opened my eyes to the realities of my financial circumstances. I now understood that I had neglected my financial education. I took his advice and immediately began getting my financial education. I have now begun to forever change my financial situation and am currently creating a source of passive income that will provide both my wife and I with a very comfortable retirement.
There are many ways to create passive income. Real Estate investment is one of them. Income from stocks and investing is another. I've expanced into these and other areas. I no longer concentrate all my efforts on carpentry. In fact, I intend to retire completly from carpentry as soon as possible. 26 years is enough. I'm now slowly beginning to replace that income with an alternate source. And I'm excited about the progress as well as the potential.
My advice is to go to amazon . com and order those two books as a starting point in your retirment plans. Also get the timeless "Think and Grow Rich" by Napolean Hill.
Hope this helps.
blue
Yeah Blue, I'm on the same track you are. I just started this thread to get others to consider these things before it's too late. I'm not a financial advisor. I have one though. I've got a SEP and am working on the real estate investment. Thanks to you and all the others for the input.
Allan, like Bruce, you should probably stick to your day job.
I strongly suggest you download Pub 590 from the IRS and review your claims about being able to fund a Roth in addition to those contributions you claim to make to the money pension purcahse plan. Note the money purchase plan is considered a pension plan. That in itself restricts one's participation in IRA's. Furthermore, your claimed level of income excludes you from an IRA. This Pub 590 will also get into discussing the penalties for which you're setting yourself up.
I see why both of you are recommending these discount brokers. You get what you pay for. In this case, it's the lower level of surveillance and advice one needs to keep their nose clean when dealing with an everchanging tax code. Can you spell "AUDIT?"
Earlier Tim mentioned AJ coming into this thread. His posts has a common theme - one of compentency. He gets on those people making claims when they really don't have the full level of knowledge required.
One another point, Greg's points about how he has used an SEP should be sent to every person working for themselves. Good for you, Greg! You've got a great handle on the issue.
Several posters have mentioned rentals. There's a lot to be said about them. For one, when the next issue of Forbes comes out mentioning the countries billionaires and how they got that way, most will have done so thru real estate.
TLE discusses the rentals issues from a very important perspective - that of his future widow's. Too many of the bull headed self employed people in this world fail to consider that point of view. And as Blue indicates, there's nothing more important.
I find it humorous that people believe the stock market has little or no value because it's down and has been for 2 years. For some unknown reason it seems that people in general only consider a good investment to be one that has already gone up in value. They will throw their whole life savings on something that has achieved it's potential rather that taking the time to rationalize what is about to become the next opportunity.
What's that old simple line that everyone knows? Buy low and sell high. I've seen and helped people invest hundreds of millions of dollars. Just about every single one wants to buy high and sell low.
It's not the investment, it's the story they buy. The better the story or how it's told in their minds creates the impression of the better investment. Those of us in the business call it, "The Greater Fool Theory." Meaning they buy it because they believe a greater fool will come along and pay them more for what they overpaid for in the first place.
Today's stock market environment represents some of the best values that you will ever see again. Today's real estate market also represents some of the most overpriced situations currently available. And the bond market is somewhere in between.
Now understand, prudent retirement preparation dictates asset distribution spread across several classes. The most successful retirees will have their income coming from dividends (stocks), interest (bonds), and rents (real estate). When values of one class become out of line, the others provide stability. They focus on what the asset does (pay income) rather than what the asset is (valued at). The opposite of the line, "Form over Function."
I like Blue's suggestion of educating yourself. Whether it's the book he mentions or some other (there's hundreds all saying pretty much the same thing), the point is to find something that motivates you to put a few bucks away towards something.
We all have our particular hot button. Blue mentions the one that hit his. When you look for that hot button presser, focus on what gets you to take action. I'm not real thrilled about those that say, "Invest my way and get Rich!" Those that try to push a particular strategy (such as options) are simply trying to sell books to cover their losses in that strategy. And look at the big picture, not necessarily what the media is touting today.
No, I think you need to go back and read what you posted. Your story has changed.
Stone , that was some pretty good stuff. Of course the reason why we are holding rentals high is because of what we do for a living. They have been the best seen investments that I have personal contact with if the person is qualified to maintain, build, and remodel. Our tools and knowledge go hand in hand.
What I dont understand that someone might shed light on is that distressed properties is getting harder to buy. {meaning more expensive} Everyone seems to want in on it, and many are doing it with out the knowledge needed. I can only blame the books and the tv with the guys promoting it. The house shows that are also on tv with all the new do it your self books. I have seen several fail , and there seems to always be a stream of new ones to take there place.
On the other hand renting couldnt be better. Also as I mentioned before ; Im being really forced back out into the field for what its paying right now. When I started buying repos 10 years ago, I beat my living at that time. Now , its a different story. My prices I charge now have doubled from ten years ago. More people want my services than ever before, and willing to pay for it. That is certainly different.
With the constuction business being as good as it is now , Im wondering how that is since most of the manufactors are having a very hard time . Wasnt it *USG that filed chapter 7 or 11?????? Mills are shuting down every week. Whats with the construction business????????
Good post, Allan.
Rentals are good, but Mutual Funds don't need to be painted, nor the grass cut.
I've had rentals for 22 years. I've seen the cycles of high prices for the most distressed properties. Just wait it out. The TV pitches don't mention the water heater calls in the middle of the night or the septic backup, or the new roof, always needed when there's not a good hailstorm in sight. (Many people wait years for a small hail storm so they can get a roof paid by their insurance company)
The people that buy the TV packages often can't stomach the unanticipated repairs, and they'll be selling out soon. The best seller to find is the one that says, " I'll never have rental property again ! "
Greg.
We have some money in the stock market, building interest towards retirement, but I think that's an expensive way to go. Basically what we're doing is giving someone some of our money and saying "here, we think you can invest this better than we can and you'll watch over it like it was your own". Even though we know we are paying for that service and know it's not true.
We own a few building lots. We are planning to build on one, sell the house we now live in, pay off the debt on the new house and build another. Then move into the third, and fourth, and the fifth. Hopefully we'll be debt free after the first sale and since we don't have to pay capital gains tax on our principal residence.
We hope to acrue enough of a nest egg after 4 such ventures to live off the interest, along with my wife's retirement from State service, our IRA's, and life insurance policies. In the meantime, I'll get to work for myself, building houses the way I'd like to build them, as long as they end up reasonably priced. Oh yeah, we have a duplex we rent out that's building equity hand over fist, too.
I know, I know, "too simple", "too risky". But it's the way we live, and it might work.
Jim,
Good for you! I Played the stocks made some, lost a lot, I did the same thing you our trying to do, after 3 houses got a nice one free and clear (at 44 years old) . The present house is right next to the old house, took a year to finish the last one if you dont include the walk out basement. Have to wait 2 years to avoid the capital gains taxs,but at my speed that works out fine! Might do one more or cash in and buy a Beach Condo & a Mt. Condo when the kids finish school.
What about trust funds? Don't y'all have one from a grandfather who was Civil War General...that made the pay-off age 65? When I get to the great beyond,he and I are gonna talk.