I am watching the gyrations of the stock market this morning and thinking about the many people nearing retirement that have been sheltering their income with 401Ks and Roth IRAs and wondering–how do they plan to generate income in retirement from these kinds of volatile investments?
Most financial planners admit that dividend income at less than 2% will not fund a retirement. So they set up retirement plans for people that actually draws down capital on a yearly basis based on their life expectancies. This is no way to get to a financially secure retirement. What if you outlive your capital?
Instead they should purchase a small income property through a self directed retirement plan that allows real estate investment. This will provide a steady income with no capital draw down. It also will allow the income property owner to increase their cash flow over time as rental rates increase in their rental markets. At the same time the property is appreciating and adding to their net worth through their retirement years.
If the prospect of managing the property is not attractive owners can hire a property manager and they can avoid the headaches of management and reap the rewards of income property ownership.
If you want to know how to get started in rental real estate funded by a self directed retirement plan contact me at katherine@khiggins.com or call me at 415-302-7730.
Katherine J. Higgins is a 30 year veteran of the investment real estate industry in Northern California. She is broker associate at Paragon Real Estate Group in Greenbrae, California.