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If you are in your 40’s, 50’s or even 60’s and you don’t feel prepared for retirement, this blog post is for you. Perhaps you just didn’t focus on retirement early enough, or maybe you lost your retirement funds through some unfortunate financial event. In any case, if you don’t feel that time is on your side with regard to retirement, you are not alone. Here are some alarming financial statistics related to retirement:
- 45% of working-age households have no retirement account assets.
- The median retirement account balance is $2,500 for all working-age households.
- The median retirement account balance is $14,500 for near-retirement households.
- 62% of working households age 55-64 have retirement savings less than one times their annual income.
Traditionally, people have focused on building a nest egg for retirement to either draw from, collect interest on, or a combination thereof. I’d like to share another approach to funding your retirement that does not require you to build a nest egg.
How Much Money Do You Need to Retire
While many focus on building a lump sum for retirement, I want to encourage you to look at how much money you need per month to meet your needs in retirement so you can focus on creating a monthly income instead. The first thing you need to do is determine how much money you will need to live on in retirement. I strongly encourage everyone to make it a goal to be 100% debt free by the time they retire, including their mortgage. For some people, downsizing their home will allow them to buy a smaller home outright and stash some money away, or perhaps pay off any remaining debts.
Once you have determined how much you will need monthly, next look at what retirement income you will have that you can count on for your retirement income. Sources of retirement income include:
- A pension
- Social Security income
- Interest on any investment savings (including 401k funds)
- Annuity income
Once you have identified your sources, add up the income that you expect from those sources. If you don’t have any of those, do not worry. I am going to share with you some non-traditional strategies for building retirement income.
To determine how much monthly income you need to generate for retirement, you will take your retirement budget and subtract the estimated monthly income from your retirement source. For example, let’s say your retirement budget is $3,500 per month and your estimated retirement income is $2,150 per month. This would leave you with a shortage of $1,350 that you need to cover. If you don’t have any retirement income sources, you will need to create $3,500 per month in income for retirement.
The next section discusses a few non-traditional sources of retirement income that I recommend.
3 Non-Traditional Sources of Retirement Income
I don’t believe that enough people consider developing an income stream to use in retirement. There are plenty of opportunities to create passive revenue for an investment far less than most retirement nest eggs. Here are a few that I recommend:
Real Estate Investing. Consider that you can purchase a rental property in many cities in the country for less than $50,000, hire a property management company to handle all of the details (from vetting tenants to making repairs), and generate decent cash flow. A $250,000 nest egg paying out 5% per year will give you roughly $1,041 in monthly income. That same $250,000 invested in 5 rental properties could give you $3,600 in monthly rental income (based on an $800 rent and paying a 10% management fee). If this is an approach that you want to take, it is recommended to start acquiring properties as early as possible, so you can build your rental portfolio one at a time. If you are downsizing and have proceeds from a sale to invest, then you may be able to purchase more than one property in a short period of time. I recommend working with a trusted real estate agent who understand the needs of real estate investors and how you want to leverage this for your retirement. If you need a referral to an agent, reach out to me. as I am a Realtor with a vast nationwide network of agent that I can refer to.
Launch a Blog. There is a low cost of entry to launch a blog, however, there is a significant time element required to grow it into something that actually produces consistent income. Ultimately, you will need to build a following, so that you can monetize your website through affiliate offers, sponsorships, product sales, or consulting. You should choose a topic that you are highly passionate about as it will involve you spending lots of time talking and writing about your field of interest.
Getting started is easier than you may realize. Many web hosting companies now include WordPress (at no additional cost) which is the #1 blogging platform out there. If you want to get started as a blogger, the first thing you should do is purchase a domain name, set up a hosting account, and activate your blog. This can all be done at SiteGround, which is the company I recommend that people get started with, as their pricing is very affordable and their service is amazing. If you need any help getting set up, just reach out to me as I have set up dozens of these blogs over the years. I can give you some resources to help you along the way, or I can refer you to someone who can develop a custom blog for you if you prefer.
Network Marketing. For those who are unaware, network marketing is a business model in which a person can become a representative to sell products or services and build a team of sales reps to do the same. The industry often gets a bad rap, but if you find a company with a product or service that you are passionate about, you can build a solid residual income through network marketing. I look at it like investing in a franchise at a fraction of the cost. My recommendation is to work with a trusted company that has a solid track record as you do not want to gamble with your success (or your retirement) with an unproven company. Click here for my #1 recommendation for a network marketing company to join.
I hope you have found this helpful and perhaps gives you some hope if you are feeling behind with regard to your retirement.