We\u2019re all taught to save our way to retirement. We take a portion of our monthly income and invest it in a 401K account. However, there is a far more effective way to retire; building cash flow from real estate investments. \u00a0<\/p>\n
Planning for Retirement<\/strong><\/p>\n According to a recent study published on cnbc.com, approximately 40% of Americans are at risk<\/em> of retiring near the poverty level. This risk (among other factors) is causing 74% of Americans to work past retirement age as they attempt to save for retirement instead of building passive streams of income. Their efforts are falling short, with four out of five working Americans having less than one year\u2019s income saved in retirement accounts. Clearly Retirement Model 1<\/strong> (i.e., saving your way to retirement) is not working for many Americans. Lifestyles Unlimited teaches Retirement Model 2<\/strong>, which is to invest in real estate to build passive streams of income and ultimately financial freedom. The two models will be compared and contrasted below over a ten-year period. <\/p>\n Retirement Model 1 \u2013 Saving for Retirement<\/strong><\/p>\n The median family income in the United States as of 2017 was $61,372 according to the Census Bureau. Taking a conservative approach and saving 15% of that income would equate to ~$767 a month. The vast majority of people can\u2019t and don\u2019t save 15% of their income each month. They live paycheck to paycheck with no savings at all. That is why the median retirement savings of families in the 56 \u2013 61 year age bracket is only $17,000 according to a recent report using 2013 data. \u00a0\u00a0<\/p>\n Let\u2019s assume you save 15% of your income, though. In 10 years, how much savings will you have following Retirement Model 1? And in 32 years? According to historical records, the long-term average S&P 500 return (since inception in 1928 through 2016) is ~10%. The average inflation for the same period of time has been ~3%. Adjusted for inflation, the historical average annual return is ~7%.<\/p>\n At the end of 10 years, you will have saved ~$83,000.<\/p>\n At the end of 13 years, you will have saved ~$192,000.<\/p>\n It will take 32 years<\/em> to save $1,000,000.<\/p>\n Because of inflation, the $1,000,000 is only worth ~$388,337.03.<\/p>\n If you retire and start living on those savings (i.e., the money from the principal portion of your retirement account), you\u2019ll bring \u201cpray you die before you run out of money\u201d into effect. In today\u2019s money, pulling out the equivalent of $40,000 a year to live on equates to less than<\/em> 10 years worth of savings. What if you live longer? Where are the golden years for enjoying travel and grandchildren? <\/p>\n Retirement age in the US is 65, but many Americans are choosing to work longer. That doesn\u2019t leave a lot of time to enjoy retirement when the average life expectancy is 79.<\/p>\n Retirement Model 2: Building Passive Income<\/strong><\/p>\n Investing in real estate allows you to retire AND enjoy your life. To illustrate how real estate investing <\/a>works, we\u2019ll use actual averages from our members\u2019 current buy, rent, and hold real estate deals. When you buy a single family house that you plan to rent out, you should work with a hard money lender. This allows you to use ~$25,000 of your own money (rather than 20% of the purchase price) to buy the house. \u00a0After closing on the house, you should capture ~$20,000 in equity. The house is then rented to a family. By renting the house, you are able to generate $400 a month in cash flow. This is passive income. That $400 is deposited into your bank account each month AFTER paying the principal, interest, taxes, and insurance (PITI). For an initial investment of $25,000, you gained $20,000 in equity and $4,800 a year in passive income. Passive income adds up quickly as you continue to buy, rent, and hold single family homes. <\/p>\n Investing in real estate may seem impossible to someone earning an average salary or to someone without savings. Nothing is impossible when you take the time to get educated and then take action one step at a time. Start saving 15% of your monthly income as you would in Retirement Model 1 (401K), and educate yourself in real estate investing while doing so. Then start buying income-producing assets instead of speculating in the stock market.<\/p>\n The following table shows you how you can increase not only your net worth but your income when you invest in real estate over a 10-year period. Let\u2019s assume you have at least $10,000 in savings already and then you start saving $767 of your earned income each month. It will take 20 months to save $25,000 to buy your first rental house as shown in the table below.<\/p>\n *<\/strong>Using $10,000 in existing savings plus $15,000 \u00a0accrued from setting aside $767 each month<\/p>\n Within 10 years, you will own 10 rental houses. Assuming an equity capture of $20,000 per house, you will have gained $200,000 in equity. That is $200,000 added to your net worth! You will also have $4,000 a month in cash flow. This is your monthly passive income. That is $48,000 a year! \u00a0After 10 years, what would your finances look like with Retirement Model 1 (saving $767 a month and investing in the stock market)? You\u2019d have ~$83,000 in the stock market and no monthly passive income.<\/p>\n What happens if we extend the real estate investment plan three more years? See the table below.<\/p>\n By continuing to invest in real estate for just three more years, you\u2019ll own 20 rental houses. Assuming an equity capture of $20,000 per house, you will have gained $420,000 in equity. That is $400,000 added to your net worth! You will also have $8,000 a month ($96,000 a year) in passive income. \u00a0In contrast, after 13 years, what would your finances look like with Retirement Model 1 (saving $767 a month and investing in a 401K)? You\u2019d have ~$192,000 in savings and no monthly passive income.<\/p>\n It should be obvious from the comparison between these two retirement models that building wealth with real estate<\/a> is much more effective. How will your life be different at the end of those 13 years?<\/p>\n You have bills to pay each month. How does $192,000 in the stock market help you pay your bills? It doesn\u2019t. The average family in the US spends ~$5,000 a month. \u00a0Could you quit your job if you had $8,000 a month (tax free) in passive income? For most people the answer is yes.<\/p>\n As soon as your passive income meets and exceeds your bills, you are retired. It has nothing to do with age. Lifestyles Unlimited has members who are students in their 20s that have done this.<\/p>\n Does building cash flow require education? \u00a0<\/em>Yes.<\/strong> <\/p>\n Does it require courage?<\/em> \u00a0Yes.<\/strong> <\/p>\n Does it require commitment?<\/em> \u00a0Yes<\/strong>. <\/p>\n Does it require hard work?<\/em> \u00a0Yes.<\/strong><\/p>\n These are the questions you must consider when deciding to follow either Retirement Model 1 or 2.<\/p>\n Do you really think there is something for nothing out there?<\/em> <\/p>\n Do you think that you will get ahead without courage, commitment and hard work?<\/em> <\/p>\n How long will you live in retirement?<\/em><\/p>\n How well do you want to live in retirement?<\/em><\/p>\n Can you enjoy your golden years? <\/em><\/p>\n We hope we have clearly demonstrated the immense value in Model 2.<\/p>\n Building wealth with real estate is so much more effective than speculating in the stock market. Get out there, get educated, and start building passive streams of income for yourself and your family.<\/p>\n \u201cFormal education (high school and college) gets you a job.<\/em><\/p>\n Self-education gets you rich.\u201d -Jim Rohn<\/em><\/p>\n Sources:<\/strong><\/p>\n![](\"https:\/\/lifestylesunlimited.com\/wp-content\/uploads\/2019\/02\/Screen-Shot-2019-02-13-at-3.08.17-PM.png\"\/)
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<\/p>\nIt\u2019s not the money, it\u2019s the Lifestyle.\u2122<\/h3>\n