Are You Making This Huge Retirement Planning Mistake That Could Prevent You From Retiring on Time and Living the Retirement Lifestyle You Want to Live?

By Brian Bagnall | Uncategorized

by Brian Bagnall

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Did you know that a new study shows that 83% of Americans aren’t going to be able to retire on time?

That’s staggering.

And that number only continues to get worse.

This has lots of ramifications. It means that you might have to continue working well past your retirement date. Or you might have to pick up a 2nd job. Or you might have to decrease your cost of living. Or, worse yet, you might never be able to retire (this is becoming more common).

The days of counting on Social Security for your retirement are long gone. And even retirees who have saved for retirement during their working years have had to make drastic changes in their lifestyles in order to adjust to their new incomes.

In fact, 56% of retirees are “not confident they will be able to live comfortably throughout their retirement years”, according to data from AARP (the American Association of Retired Persons).

Sadly, most Americans will just not be able to maintain their lifestyle in retirement and many will see their savings and investments come up short for even the most basic of expenses. But you’ll be one of the few who will be financially set if you follow the advice in this article.

What is the Most Common Mistake People Make When It Comes to Their Retirement Investments?

It’s actually quite simple. The most common mistake is doing whatever else is doing.

Most people invest the funds in their retirement account into a combination of these things: stocks, bonds, mutual funds, or cd’s.

There is one major problem with this.

If you’re doing what the average person is doing, how can you possibly expect anything other than average results?

And the answer is: you can’t.

The average yearly return investing using a combination of stocks, bonds, mutual funds, and CDs is 3% to 6%.

By the time you factor in a few percentage points of inflation every year, you’ll find that your money really isn’t growing as much as it needs to maintain your current lifestyle through retirement.

One of the Most Under-looked Investment Techniques

Hands down, one of the best things that you can do make sure that you retire on time (or early) and still be able to maintain your current lifestyle is investing in real estate using your IRA.

Now, before you go running for the hills… it’s not the get calls at 2am in the morning to unclog a toilet or rehab a property in a war-zone kind of investing in real estate. It’s completely hands off. You’ll definitely want to read until the end before you judge.

Real estate has created more wealth in America than almost any other method of investing. It provides the opportunity to generate income from rent and appreciation. Real estate tends to perform really well over long periods of time and the rewards can add a great deal to your chances of retiring on time.

Buying real estate in your IRA isn’t a new concept, in fact it has been a possibility since IRAs were formed back in 1974. Many investors and even real estate professionals are unaware that retirement funds can be utilized to invest in real estate.

The Best Way to Do It

You can use your IRA to invest in any type of real estate but the best investment technique you can use in your IRA is to buy rental properties. You can do this hands off where you never make a repair or meet a tenant.

1. Open up a Self-Directed IRA (SDIRA) Account. You can transfer funds from a current institution, rollover an old 401(k) plan, or simply make an annual contribution.

2. Find a property that’s in good shape that gives you at least a 10% yearly net ROI (preferably with a tenant in place). The formula for determining ROI is:
(Yearly Income – Yearly Expenses*) / Total Purchase Price
If the answer is 10% (.10) or above, it’s a good investment.

* Expenses include property taxes, association dues (if any), utility bills paid by owner (if any), management costs, and a 5% per year repair allowance.

3. Place it with a management company to manage the property so that you never get a repair call or have to deal with a tenant. You simply deposit checks and pay expenses.

These are the basic action steps but there’s a bit more to it. We actually have a FREE service that can help you with all of this (including opening up your SDIRA, finding a property, and selecting a management company). If you’d like to schedule a time chat about it (and get a copy of our FREE report, “Cash Flow Investor’s Report”), just click here.

Do’s and Don’ts

If you want to use your IRA to buy real estate, you need to understand what you can and can’t do. Violating any of these things could cause you to lose your IRA to lose its tax-free status.

  • You can’t live in the property yourself or have use of the property in any way. So you can’t use this method to buy a vacation home that you would use.
  • Income generated by the IRA-owned real estate must go back into the IRA.
  • You can not pay for any property related expenses with your personal funds on behalf of the IRA. All expenses must be paid from the IRA.
  • Maintenance and Improvements cannot be performed by the IRA holder.
  • You can’t get a traditional mortgage loan in an IRA, so you really need to have enough money in your IRA to purchase properties for cash if you plan on having the property as a long-term rental. (Don’t worry, you can purchase a cash-flowing rental for as little as $35,000.)
  • Don’t restrict yourself to buying rental properties in your own backyard. In fact, in most cities, you can’t earn a 10%-15% return on your money anyways. You want to look for cities with low property prices and high rents. This usually eliminates highly populated places like New York, Chicago, LA, Dallas, San Francisco, and other major cities where investors typically only earn a few percentage points on their money because property prices are so high.

What are the Benefits of Holding Real Estate in my IRA? 

There really are many but I’ll detail the main ones here:

  • Real Estate is a tangible asset; you can see it and touch it. Personally, I never liked the idea of investing in stocks, bonds, or mutual funds because all I get is a statement to look at every month. I have no control over whether the companies I invest in do well or not. I’m basically gambling and hoping for the best. Besides, if you’re just investing in whatever everyone else is investing in, you can’t possibly make more than average returns (average activities get average results).
  • Your money grows tax free. That’s right, the income from your properties will grow tax free (as well as the appreciation).
  • Make double digit returns. The average rate of return investing in stocks, bonds, and mutual funds is 3% – 6%. After you account for inflation, you’re only making a few percentage points on your money every year. To really be able to see your money grow, you have to invest in instruments that will yield at least a 10% on your money every year. Investing in rentals can do this for you. In fact, it’s not uncommon to make 15% on your money every year.
  • It’s safer than most investment methods. Don’t let anyone every tell you that any investment method is 100% safe. They would be lying. But, I have never found anything safer. Rents typically don’t go down so your cash flow will be safe. And even if rents do happen to go down (have you ever had a landlord lower the rent?), property values typically go up. Also, we recommend that you don’t invest in high appreciation areas (like California, New York, or Florida) because as fast as the value can go up, it can come crashing down even faster. Average appreciation is best because then we won’t be affected by any real estate bubbles. Besides, we’re in this for the monthly cash flow. The appreciation is just a bonus.

Most people don’t realize the huge difference between a low return on investment and a high one. If you are able to obtain better returns on your investments, you can both drastically reduce the time it will take you to retire and considerably increase your monthly budget once you do so.

Let’s look at this graphically (based on someone that starts investing $1200 a year at age 35 and retires at age 65):

Annual Contribution Return on Investment Total at age 65
$1,200.00 5% $79,762.62
$1,200.00 15% $521,694.18
*This numbers were calculated using Bloomberg’s retirement calculator at:

Shocking isn’t it? Well, this is the impact that investing your money like a pro can have on your long term financial future.

And don’t worry if you’re over the age of 35 and haven’t started yet. No matter what your age is, there is still time to make changes that can have a lasting impact.

 So What Now?

So you’ve read this article but what exactly should you do next?  Well, you have 2 choices:

1. Be average
2. Be smart

An average person would click away from this page and continue to make average returns investing in stocks, bonds, and mutual funds.

smart person will say to themselves, “I really need to stop procrastinating on my retirement accounts and take an active interest right now.”

It’s never too early (or too late) to start making changes to your retirement plan to make sure that you’re getting the best return possible so that you can enjoy retirement on your terms.

To help those that are smart, I wrote a guide called the “The Cash Flow Investor’s Report” to help you get a better idea of what your next steps should be when it comes to adding real estate to your portfolio. In the guide, I detail what you can do to make sure that you retire on time (or early) and have a secure retirement where you’re doing the things that you want to be doing.  And I want to give it to you for free.

While there is really good information contained in the guide, there’s nothing like a seasoned investment expert personally reviewing your portfolio and giving you customized advice.  And I want to help you do just that… for free too!

So go here to request your free guide (and be sure to check the box on the form to request your Free Investment Boosting Session with me personally).

When we jump on the phone, you’ll walk away with a retirement plan with specific, measurable financial goals and a custom investment strategy to fit your needs that you can immediately implement to double or even triple your current ROI.

If you found this article helpful, don’t forget to share it and leave a comment below. :)  I try and respond to every comment.


About the Author

Brian Bagnall is an in-demand author, speaker, and real estate investor who has written several books and spoken at conferences throughout the United States. He's shared the stage with business greats like Daymond John from Shark Tank. Brian actually practices what he preaches. He began his investment empire with just $3,000 in start-up capital and has gone on to purchase over 100 properties (and counting) all over the country. Brian turned his small investment into a multi-million dollar success.