INVESTMENT STRATEGY
REI VS. RETIREMENT ACCOUNTS
SPONSORED CONTENT
Retirement Accounts Vs. Real Estate Investing INVESTING IN REAL ESTATE, LIKE SAVING FOR RETIREMENT, IS A LONG-TERM PLAY; HOWEVER, IT CAN SET YOU UP FOR A LUCRATIVE FUTURE.
by Zach Lemaster
e’ve all heard the question: Would you rather have $1,000,000 today or have a penny double every day for 30 days? What if we changed the question to: Would you rather contribute $200 per month for 30 years to a retirement account or $200 per month toward real estate? Would your answer change if we also said it would take you more than eight years to secure your first rental property (i.e., cash-flowing property) when saving at just $200 per month? People know they need to save for retirement, but many don’t start when they should. Many delay starting for W
a number of reasons—they’re paying off debt, waiting until they start a family, ensuring they have a stable job. Or, they simply think they have time to start.
the power of compounding in this example. Our out-of-pocket con- tribution was only $72,000, but the interest we gained was $199,879. Pretty remarkable! Many people focus solely on retirement accounts and what retirement accounts can provide. If this was our primary method for retirement, using the 4% rule, we would have an annual income of $10,875.16 in retirement, or $906.26 a month. (The 4% rule is a general rule when considering how much retirees can withdraw with a level of comfort their funds will last more than 30 years.)
INVESTING IN A RETIREMENT ACCOUNT
There are lots of different ways to fund retirement accounts, but for the sake of this example let’s focus on Roth IRAs. If we contribute $200 a month to a Roth IRA from the ages of 35-65 (assuming an average rate of return of 8%), we will end up with close to $271,879.71. We can see
16 | think realty magazine :: july – august 2022
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