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Real Estate and Retirement

Oct 31, 2017 by

Little known secret: A retirement plan that works well for agents is the Solo 401(k). You can save up to $ 54,000 ($ 60K for agents over 50) a year and deduct it from your taxes.

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Real Estate and Retirement

Sep 25, 2017 by

A retirement plan that works well for real estate agents is the Solo 401(k), which allows you to save up to $ 54,000 ($ 60,000 for agents over 50) per year and deduct it from your taxes.

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Real Estate and Retirement

Aug 12, 2017 by

Little known secret: A retirement plan that works well for agents is the Solo 401(k). You can save up to $ 54,000 ($ 60K for agents over 50) a year and deduct it from your taxes.

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Study: Is Home Equity Still a Retirement Failsafe?

Nov 13, 2016 by

Homeownership is one of the more viable paths to a secure retirement—but many older homeowners missed the prime opportunity to leverage that equity before the recession. How much usable equity can older homeowners now expect in retirement, given the rebound in home values?

A recent study by the Urban Institute explored the answer to this question, analyzing the equity patterns among older households before, during and after the recession.

“Not only does a house meet the basic need of shelter, but it’s an asset that typically can be used to build wealth as homeowners pay down their mortgages,” the study’s authors state. “In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources—Social Security, pensions and savings—is incomplete because it ignores the home.”

Homeowners aged 65 or older, according to the study’s findings, could have used their home’s equity to grow their retirement income by over 50 percent (up to $ 60,000) pre-recession, either by borrowing a home equity line of credit, selling their home at a profit, or taking a cash-out refinance or second mortgage. That percentage dropped to 40 percent (up to $ 49,000) by 2012, despite accumulating an average 10 percent more equity then than in 1998. Home values, still, grew 3 percent by 2014. Monetarily, the average older homeowner’s equity stake increased from $ 117,000 to $ 166,000 between 2000 and 2006, then decreased to $ 129,000 by 2012.

The swings not only parallel the movement of the market—according to the study’s findings, equity patterns follow mortgage debt trends, as well. From 1990 to 2006, national mortgage debt grew to $ 11.3 trillion from $ 2.5 trillion, then fell to $ 9.9 trillion by 2015; for the average older homeowner, debt grew from $ 44,000 to $ 82,000 between 1998 and 2012.

Mortgage loan-to-value (LTV) ratios also moved in tandem; in fact, the proportion of older homeowners with LTV ratios at 80 percent or more doubled from 1998 to 2012, according to the study. The proportion of underwater homeowners tripled over the same period.

Older homeowners today have more favorable retirement conditions, but not without contingencies. Low-income and minority homeowners tend to have most of their wealth tied up in their homes, but accumulate the least equity overall, according to the study—with loan approval related to income, these segments could become challenged, even though they have the potential to increase their retirement incomes considerably more so than other higher-income or majority groups. Low-income and minority homeowners, the study’s authors postulate, will likely rely on Social Security as their primary source of income in retirement.

Older homeowners overall, however, have more of an opportunity now to unlock the wealth potential of their homes in retirement, even with the recession in the rearview. Their prospects, as the study demonstrates, lean on home value, as well as mortgage debt. State the study’s authors, “The majority of older adults, regardless of income, race and ethnicity, and education, own homes that they could use to help finance their retirement.”

Source: Urban Institute

Suzanne De Vita is RISMedia’s Online News Editor. To submit a tip or story ideas for consideration contact Suzanne at sdevita@rismedia.com or 203-855-1234 ext. 141.

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Depending on stock returns to fund your retirement? Think again

Oct 6, 2015 by

How worried should I be?

That’s a question financial people get a lot when the market is as unstable as it has been over the past several weeks. Actually, it’s a question we ask ourselves in those environments.

Having both asked and answered that question several times recently, let me share some of the answers I’ve come up with.

Down 500 points? No big deal.

The stock market has hit some major downdrafts lately, including days when the Dow Jones Industrial Average lost over 500 points.

Inevitably when this happens, the media post pictures of Wall Street traders tearing their hair out. That’s okay. Baldness is an occupational hazard, and they are compensated well enough to afford Rogaine.

An important thing to remember about those traders is that they have large amounts of money at stake on very short-term market positions. Outside of the financial sector, though, most investors are trying to save for the long term, for retirement. This means accumulating wealth over 20, 30, or 40 years. Have you ever seen what a 3 percent loss (roughly the equivalent of a 500-point drop at today’s level of the Dow) looks like on a 40-year chart of stock market returns? It is barely a ripple, something you wouldn’t even describe as a speed bump.

Bigger problems than market downturns

For long-term investors, then, most day-to-day or even month-to-month fluctuations can be shrugged off. What is more disturbing is that, for all its ups and downs, the stock market has made very little progress over a long period of time.

Since the beginning of this century, the S&P 500 has gained just over 34 percent, or a compound average of 1.90 percent a year. Throw in a couple percent a year for dividends and you would roughly double that on a total return basis. But returns in the neighborhood of 4 percent a year are far below the growth assumptions people make when they are doing retirement planning. This has been going on for more than 15 years now, which is a significant chunk of anyone’s retirement time horizon.

Add to that the low yields on bonds over the past several years and the even lower rates on savings accounts and other bank deposits, and you are looking at long periods of sub-standard returns for most U.S. investors. This is a bigger problem than any short-term market downturn.

Economic reality vs. perception

Markets are one thing; the economy is another. While the U.S. market was going through all the angst of late August, one very positive piece of economic news went almost unnoticed. The official estimate of U.S. gross domestic product was revised upward to 3.7 percent, a substantial improvement over the original estimate of 2.3 percent, and significantly better than the first quarter’s rate of 0.6 percent.

The contrast between the stock market and the underlying economy is even greater in China. For all the attention the dramatic plunge in Chinese stocks has gotten, what is less reported is that their economy is continuing to grow, albeit at a slower rate than in recent years. Squeezing some of the speculation out of the Chinese stock market should be good for investment there in the long run.

Protecting your number one asset

When the investment environment gets worrisome, your attention should turn to your number one asset. This probably is not your portfolio or even your house. It is your job.

Keeping that stream of income coming — and growing it through career advancement if possible — can help pick up the slack when investments are doing little to build your wealth. Keep your skills sharp, and look to add value at your job to a degree that would make it difficult for your employer to do without you.

Control what you can control

Besides attending to your career, the other thing you can control when investment results disappoint is your spending. Lower returns may mean you have to lower your spending expectations, both now and in retirement. Doing this on your own terms is much less painful than having austerity forced on you when you can’t pay your debts. Just ask the Greeks.

One way to think of all this is that you should be concerned rather than worried. Concern means that the situation is serious enough to merit some attention, particularly with regard to safeguarding your career, tightening up your spending habits, and being alert for investment opportunities. Acting out of concern is distinct from merely worrying, which usually involves unproductive activities like checking the market every five minutes or lying awake at night worrying about decisions that are already behind you.

This notion of acting constructively toward things you can control is perhaps the best cure for a worrisome environment. Once you’ve done all you can do, it is easier to stop worrying and turn your attention to other aspects of your life while the stock market’s drama plays itself out.










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