Have you saved enough for retirement? If you’re like most Americans, the answer is a resounding NO. Fortunately, it’s not too late (unless you’re retiring tomorrow).
Here are three easy steps you can take right now to help ensure you don’t become one of the millions of Americans who either have to keep working past age 65 or who must adjust to a lower standard of living during their retirement.
1. Max Out Your Retirement Accounts
Are you contributing the full allowable amount of pretax dollars to your retirement accounts? The maximum 401k contributions for 2016 are $18,000, and if you are older than age 50 you are eligible to contribute an additional $6,000. These employer-sponsored savings programs are a great way to take advantage of matched funds and let your capital grow.
If your company doesn’t offer a 401k, or if you’re a sole proprietor, you may be eligible to use a Solo 401k. You can also invest your pretax dollars in a Traditional IRA, which has a 2016 maximum contribution amount of $5,500, or $6,500 if you are over 50.
The more time these funds have to grow for retirement the better. Making sure that you’ve maxed out your contributions every year will not only give your capital the time it needs to grow, but it will also minimize the amount you’ll need to pay in taxes.
2. Rebalance Your Portfolio
When was the last time you rebalanced your portfolio? For many investors the start of the New Year marks a good time to take a look at how their assets have performed and their overall weight across different asset classes in their portfolio. Many investors also take the time to assess their risk levels to make sure they are still in line with their overall investing goals as well as their timelines for retirement.
Rebalancing your portfolio will give you a chance to add new and/or additional asset classes. This is a great opportunity to not only add diversity to your portfolio, but also maximize your potential upside.
3. Invest in an asset class that appreciates in value and generates regular cash flow
Although there are many types of assets that can provide cash flow and/or growth through appreciation, they typically come with a number of downsides.
• Bonds offer investors high stability, though overall returns are among the lowest of the asset classes.
• Dividend paying stocks currently average near 2% yields, though these investment vehicles are susceptible to the highly volatile equities markets.
• Annuities typically come with a set of complicated rules, riders, and high fees exchanged for guaranteed income for life. One of the most significant downsides to life annuities is a complete drain on asset value, providing heirs with zero inheritable wealth.
Another option that can provide both monthly cash flow and appreciation over time is real estate, especially single family rentals. Although the initial investment amount is higher than the options listed above, single family rentals provide advantages that you can’t get with any of the asset classes mentioned above, including:
• A tangible asset that can be left to your heirs
• Diversification from the ups and downs of the stock market
• A hedge against inflation
• Some unique tax advantages
Furthermore, if you invest in properties across multiple geographic markets, you reap the benefits of an additional layer of diversification, as each region has unique economic factors driving rental demand and investment growth.
Accomplish all 3 Investment Tips at One Time
One of the best things about single family rental investing is that you can own properties while simultaneously maxing out your retirement accounts and rebalancing your portfolio. You can roll over a 401k or an IRA into a self directed IRA and use it to invest in single family rentals.
The Downside to Single Family Rentals – Solved
Finding, acquiring, and managing rental properties is a tedious time consuming process. How do you know which markets to invest in (the best ones aren’t always the ones you live in), and which properties are rentable? How do you make sure the numbers pan out, and what vacancy should you consider? How do you get a broken garbage disposal fixed in the middle of the night? These are all difficulties that have kept many investors away from this lucrative asset class, but these problems no longer exist.
At HomeUnion we take care of all these issues and more for our investors. Our end-to-end real estate investment services make it incredibly simple for you to invest in single family rentals and generate a solid return.
Don’t leave your investments to chance in the New Year; get a jump-start on your retirement planning today. To learn more about how you can create a diverse investment portfolio with real estate, sign up for a free consultation with one of our talented Solutions experts.