My dad was a successful realtor and investor in Orange County CA in the mid-60s to late70s. He was able to retire from the cash flow of his 20 rental properties at age 48. I learned the advantages of owning real estate such as: appreciation, leverage, cash flow as well as the tax advantages.
During my career, I have met scores of people in various life and financial situations. What has been true is everyone wants cash flow. And cash flow trumps assets, especially in retirement. Real estate is a great investment, but the equity is locked up and can’t be accessed without a cash out refinance or sale.
When we meet with clients, we share with them 5 Guaranteed Income Streams in Retirement that they can position themselves to benefit from. What this does is give them peace of mind, they can enjoy the retirement they have dreamed of and do the things they enjoy doing without the fear of running out of money.
Here are the 5 Guaranteed Income Streams in Retirement that we help our clients benefit from.
Social Security: Americans have paid into Social Security their whole adult working life. The average person has earnings of $1.7 million during their lifetime. FICA tax is 7.65%, of which 6.2% is for Social Security and 1.45% is for Medicare.
So, based on this, the average person pays $105,400 into Social Security during their lifetime and $24,650 into Medicare, for a total of $130,050. The average lifetime benefits a worker receives from Social Security and Medicare is $573,000. In other words, we get 4.4 more than we pay in. Having said that, most people can’t live on Social Security, especially if they have a mortgage when they retire.
Fixed Indexed Annuity: Annuities have come a long way and are now a preferred choice for pre-retired people as well as those in retirement. An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You get a fixed amount of money for the rest of your life in return for a lump sum payment. Annuities can be complex, we help people understand how they work, and only work with top rated companies.
HECM: This is the legal term for a reverse mortgage. Today’s reverse mortgage isn’t your parents reverse mortgage. Reverse mortgages are the safest mortgages available today. A reverse mortgage can either: make the mandatory monthly mortgage PI payment optional OR if someone owns their home out right or has a lot of equity, they can access that equity 3 ways: lump sum, monthly payments, or a line of credit that grows by compound interest. When a borrower takes out equity, it isn’t taxable. A borrower can use the proceeds however they wish, except purchasing an annuity, as in effect, you are annuitizing your equity via monthly installments.
Real Estate: People who own real estate receive several benefits as mentioned previously. Real Estate may be the cornerstone of a person’s net worth, as 2/3 of people have most of their net worth invested in Real Estate. This option builds wealth over time.
Indexed Universal Life: Today’s IUL policies offer money today through policy loans, money tomorrow as they can include living benefits if you get sick, and money tomorrow in a death benefit for your heirs. Indexed Universal life insurance policies provide greater upside potential, flexibility, and tax-free gains. This type of life insurance offers permanent coverage if premiums are paid. In general, these policies are best for those who are seeking options for a tax-free retirement.
