How Much Will You Need to Retire?
The Frustrated Doctor's Guide to Creating Lifestyle
Freedom Faster Than You Ever Thought Possible
(a)$ (monthly lifestyle income required) X 12 months =
(b)$ (annual income required)
Gross up for taxes (est. 25% effective rate):
(b)$ X 1.33 =(c)$ (total annual income req.)
Inflation (best guestimate) = 4% per year
(We'll deal with inflation in the asset investment section)
What is your current passive cash flow income from investment capital/assets? (stocks, bonds, annuities, real estate)
(f)$ (annual passive cash flow).
(c)$ minus (f)$
(g)$ (your current "income gap").
*Note: Depending on "your number in (g)", you have two choices in order to retire or transition out sooner:
1. Reduce your retirement lifestyle expectation (and/or)
2. Increase your investment capital and return expectations
What is your best estimate of the proceeds from the sale of your business or professional practice after tax? = (h)$
Estimate the dollar amount of your current investment capital that is "under-invested" because of fear or indecision about the economy? For example, is a significant (20% or more) of your current investment capital invested in savings,
CD's or US T-bills? = (i)$
Any other anticipated capital from asset sale or inheritance? = (j)$
(h)$ + (i)$ + (j)$ = (k)$ (net available capital for investment)
1% CD's, bank savings, U.S. T-Bills
2% Same as above
4% Municipal bonds (tax-preferred increases rate of return by approximately 25%)
8% secured, low risk, low volatility real estate investments
10% secured, low risk, low volatility real estate investments(r)% (put your best guess number here) x (k) = (l) per month
Remember: This number does not include consumer debt (personal residence, auto, vacation home, personal credit card or other personal debt). This debt needs to be paid off before your retirement date.*
*Tip: paying off existing debt and building net worth and passive cash flow can be done simultaneously with the right paln of action and investment strategy. Most business and professional practice owners have never had a viable plan or strategy and have relied on outmoded financial advisor plans that concentrate investment in stocks, bond and annuities - all financial products highly susceptible to volatility in the market place.
$120,000 X 1.33 (to gross up for taxes) = $160,000/yr. (income requirement for post-retirement lifestyle)What's Your Rate of Return? (on your available investment capital)? See your answer (r) above.
$160,000/yr. passive income requires:
@ 1% return.....$16.0M capital investment required
@ 2% return.....$8.0M capital investment required
@ 4% return.....$4.0M capital investment required
@ 8% return.....$2.0M capital investment required
@ 10% return....$1.6M capital investment required
The point is, your ability to safely earn a higher rate of return on investment is a major key to your ability to retire or slow down sooner without having to reduce your desired retirement lifestyle.
Real estate provders these I.D.E.A.L. benefits that no other investment asset class provides:
Income (cash flow or interest)
Depreciation (tax advantage)
Equity (real estate can be purchased at a discount forced through property improvements, or realized via appreciation/inflation, net worth build-up)
Amortization (pay down of debt through rental income, equity build-up, net worth)
Leverage (real estate growth can be greatly enhanced through the use of safe and prudent leverage)
1. Hard asset investments (security)
2. Cash flow (dividends)
3. Inflation protection (growth)
Real estate cash flow (rents and/or interest payments) rise with inflation as does the intrinsic value of real estate.
Taxes must be a consideration in any investment and retirement planning. Tax rates will only go up in the future.
Real estate is a "tax-preferred" investment. Expenses and depreciation write-offs are two of the tax advantage of real estate 1031 exchanges (exchanging the profit or gain from one real estate property to another without paying current taxes on that profit).
Self-directed IRA's and Qualifield Retirement Accounts Very few people understand that real estate is an allowable option for retirement accounts. There are many IRS-approved third party custodians who can assist with setting up self-directed accounts which allows the account holder to "direct" or make their own investment decisions.
With 2018 already here I want to set you up so you can have an income for life, regardless of how many hours you work. I don’t want 2018 to be another year of watching your portfolio grow 6% and knowing it’s not going to be enough when you need it.
Here is my goal…
I want to equip you with as much knowledge as I can freely share to put you in the best position to succeed where your financial advisor will fail you. To keep you from paying the price of being a hardworking dentist like I almost did.