Still Don’t Understand Your Retirment Plan Options?

I am always surprised that more people are not aware of the opportunity to buy investment real estate with their retirement plans. As a Certified Financial Planner ™, I am charged with the fiduciary obligation to advise clients on the best use of their investment dollars to meet their goals, needs and resources.

Owning a fully paid for rental property in your IRA or 401(k), professionally managed by a quality property management company, can offer an excellent monthly income stream that you cannot outlive. Depending on rents, purchase price, and management and maintenance costs, a rental property can produce 5% to 10% income streams, even higher in some locations.

A recent article by some of my colleges talks about living off a 201(k). To compensate for the poor returns and higher rates of withdrawal, David Frisch, a fee-only CFP® says, the client may have no choice but to return to work.

What they are referring to is the traditional withdrawals and sales from securities to produce income. To compensate for lower returns, inflation and longer life span, clients will have to lower their withdrawal rates to 2.8% from 4%. That is a far cry from the 5% + income rates rental real estate can provide. Rents are historically a great hedge against inflation and should provide for increasing income over time.

While investing in hard assets like real estate is a critical addition to any retirement plan, it does not answer every aspect of a retirement plan. Items such as liquidity, diversification, and the ever present rules of real estate (location, location, location) must be addressed.

Using loans to buy real estate in your retirement plan is also a useful tool, but also adds risk and planning needs to ensure the property is fully paid for by your retirement date.

Ask your Realtor® about using your retirement plan to buy investment real estate. They should be able to direct you to a qualified investment specialist or firm that can help you establish a self directed IRA or 401(k) that you can use to buy real estate.

About Roger Simard

Roger P. Simard, CFP® Roger P. Simard is the founding principal of Genesis Financial Advisors, LLC, and Genesis Tax Advisors, LLC. He heads the firm's corporate and personal financial planning practice and oversees all operations. Mr. Simard concentrates his work in the fields of financial planning, real estate investing, tax planning, and portfolio management. Mr. Simard is a Certified Financial Planner™ and has over 23 years of experience helping individuals and businesses achieve financial success. Mr. Simard was a speaker for The Prudential Spirit of Community Awards, a nationwide youth recognition program honoring secondary school students for outstanding service. He is a frequent speaker and radio guest on business and taxation issues and successful investment strategies and provides Continuing Education classes for Realtors.
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