By Duane Duggan, CRS
In the wild, the silverback gorilla is the wise member that rules the troop. According to NAR, the average age of active real estate agents is 55 years old. That means there are many “silverbacks” in our industry who have been around a day or two, and retirement age is rapidly approaching for many of them. However, we find that the typical REALTOR® has made no real plans for retirement. Warren Buffett says, “If you don’t find a way to make money while you sleep, you will work until you die.”
REALTORS® need to figure out a plan to do just that. But they don’t just have to walk away from a business that they’ve spent their professional life building; they can now embrace new roles that match their current stage in life.
So what is your definition of being able to retire? Mine was to have enough cash flow to easily meet monthly necessities, comforts and a few luxury items. Meanwhile, I have created an estate that continues to grow rather than being depleted, and I have covered potential long-term care needs that could arise toward the end of life.
There are three basic ways a REALTOR® can work toward making money while they sleep and retire comfortably.
1. Invest in what you know: real estate.
I see so many REALTORS® who have no real estate investments. That would be like a stockbroker not owning any stock. As REALTORS® it should be easy to figure out a plan to retire on real estate investments. It could be a simple plan—figure how much net rental income you would like to retire on, and then figure out how many houses you would need to have free and clear by the desired retirement date. Then execute that plan.
2. Invest in real estate using your IRA funds.
Most people don’t know you can own houses in your IRA. It has been OK to do that since 1978. Following through on “investing in what you know,” owning real estate in your IRA has many benefits for long-term retirement growth. If you have a Roth IRA, you can grow your investment tax-free and disburse it during retirement tax-free.
It is even possible to get a loan for buying real estate in your IRA. It just has to be a nonrecourse loan and not a typical FNMA product. In my area, a commercial bank has finely tuned the process.
3. Embrace new roles.
When most REALTORS® are ready to stop actively listing and selling homes, they just walk away. Why not build your business into something that has value after retirement, like a doctor, dentist, attorney or accountant? Those professionals have been doing it for years. The key here is building a strong database—a list of relationships—that can carry over into a new person or team taking over your business and paying residuals. Also, consider embracing a new role as a mentor, speaker or paid consultant and supplement your retirement income from a variety of sources.
The earlier you start planning for retirement, the more time will be on your side. Start planning now and then work that plan.
If you’re thinking more about retirement—or just about getting an excellent tax break—look at the solo 401(k). It might be the best retirement option for one-person businesses because of how quickly you can accumulate money in the plan. Visit crs.com/membership/benefits/solok to learn more.
Photo: iStock.com/skynesher
