The Retirement Dilemma . . . The Stock Market Roller-Coaster and Taxes!

So you are a successful professional in your 40’s to 50’s and are busy with your family and business. You have turned over your financial life to your “Financial Person” to develop your portfolio and put your money to work for you. You are maxing out your 401k and IRA to minimize your taxes today and into the future. Your investment choices that your “Financial Person” and 401k/IRA present to you are in Stocks, Options, Bonds, Whole Life Insurance and Annuities.

So what happens when you are ready to retire?

You stay invested in Stocks and Bonds and may change the mix to protect against a bear market. You rollover your 401k into an IRA so you can have some additional choices without the 401k plan costs that eat away at your returns. Your “Person” will continue to tell you that you will have to endure the roller-coaster ups and downs of the stock and bond market or put a good bit of your portfolio into an annuity so you can sleep at night. The “Rule of Thumb” that they will share with you is that you may live 25 to 45 more years and to protect yourself you need to ONLY take 3 to 4 percent out of your nest egg each year to live on. This will insure your money will last through your lifetime.

So let’s do the math, over your life you have saved three million dollars…Congratulations!

Let’s say half of that money is in IRA’s and 401k and the other half is in your brokerage account. You are making $350,000 a year in your household today and plan to retire next year. Based on the rule of thumb, you need to plan on taking 4% or $120,000 out of your nest egg next year to live on and plan on having it taxed since you will have to sell some equities or start your annuity payments. Best case scenario is you will net around $100,000 after federal long term capital gain taxes and less if you live in a state with income taxes. $3,000,000 doesn’t go as far as you think it would, does it! This gets worse when you start tapping into your IRA when the tax rates will be higher than capital gains rates. Also, our current tax rates are at an all time historic lows (40.8% for the top earners) so ten years from now you may only be able to net 50% or less of your distribution from your IRA when tax rates go up to pay for the $22 trillion dollars plus Federal Debt. Just for context, the top income tax bracket never dipped below 70% from 1945 to 1980.

So your dilemma, AND MINE, is . . .

you worked your whole life and have enjoyed a great life style and in retirement you are going to have to scale way back to insure you don’t run out of money at the end of your life! If you are like me, you are thinking that there has to be a BETTER way…a way to live on more of your portfolio each year, grow your portfolio and do it without riding on the roller coaster of the stock market!

I want to open your eyes to a type of investing that you probably haven’t heard of before, I know I hadn’t. This type of investing will allow you to feel more secure in your retirement, live on more of your portfolio and look forward to a better financial future. It also may allow you to leave a financial legacy to your family.

Over the next several installments, you will learn what I have learned about how you can passively invest in Multifamily properties and the many benefits that it can provide as you plan for a wonderful retirement.

Wishing you Great Fortune and Happiness!

– Dan Engdahl, Co-Founder Multifamily Connections, LLC 

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