When Retirement Plans Meet Retirement Reality

retired fishermanPlanning for retirement has become a hallmark of a healthy, responsible financial lifestyle.  Congress created tax deferred vehicles like IRAs and 401Ks to encourage saving.  Young workers are taught the wisdom of starting their nest eggs early and employers need good plans with matching contributions to attract the best talent.

For many people, however, their retirement plans haven’t worked out as planned.    The Great Recession cost thousands of people their jobs and many lost their homes in the housing crash.  For others, college tuition, divorce, medical bills, natural disasters and tragedies made it impossible to contribute or wiped out their savings altogether.  For millions of Americans, their retirement plans are falling short of their retirement realities.

retirement readinessEven though retirement income adequacy improved slightly in 2013 due to the increases in financial markets and housing values, the probability that Baby Boomers and Generation Xers would NOT run short of money in retirement improved only slightly, according to the Employee Benefit Research Institute. The aggregate shortfall is $4.55 trillion, for an overall average of $47,732 per individual.

In fact, between 40 and 45 percent of Boomers and GenXers will run short of money in retirement, according to EBRI’s latest study.

Moreover, future possible cuts in Social Security benefits make a huge difference for the retirement income adequacy of some households, especially Gen Xers in the lowest-income quartile. If Social Security benefits are subject to proportionate decreases beginning in 2033 the retirement readiness for those families will drop by more than 50 percent, from 20.9 percent to 10.3 percent.

I had no idea this was happening.  What can be done?

When you do the math you may realize that your current savings plus your Social Security income will not be enough to produce much of a lifestyle.  If you are in your forties, fifties or even your sixties, however, there is no need to panic.  You can take steps to build a better future for you and your family, but you should not delay.

How?  Buy a lottery ticket?

No.  You have much better options than that.  In fact, you can improve your prospects for retirement dramatically but also at less risk that investing in the stock market.  The answer is to invest in single family rental homes.  The secret is the double source of income:  rent from your tenants and appreciation in the value of your property.  Working together you realize remarkable return on investment.

Here’s something that’s very important for older investors.  You don’t have to wait for your investment to pay off.  Every month you get a rent check in the mail.

If this is such a great idea, why aren’t others doing it?

They are. Residential real estate is one of the hottest investments around.  Hundreds of thousands of investors are making great returns off rental properties as home appreciate and the demand for rentals grows and grows.

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