Retirement! Forget retirement! What goes through your mind when one says “forget retirement”? We’re not inferring that you’ll be working till you drop dead…no… or that you should stop investing for your future years. How about this for a change in thought. What if you could invest in your retirement; AND be able to enjoy the returns from those investment TODAY? We’re actually suggesting as the expression goes…you CAN have your cake AND eat it too – right now!
Retirement Strategy – buy low, sell high
For years, people have been socking away money into investments hoping, that in the long run, they will be of greater value than today. Take a mutual fund for example…buy it today for $10.00 and at some future date, sell it at $15.00 – the buy low…sell high strategy.
But what we learned from our painful experience since the fall of 2008, with the credit crisis and financial recession that followed, many investments did not fare so well.
the fall of the market in 2008 – Investopedia.com
Many who retired during this period likely had to rethink their strategies as their retirement portfolios dropped 30%, 40% or more percent! In fact, some even decided to continue working to make up for the shortfall in their portfolios – ouch, that really hurts!
It was and still is challenging for those whose strategy was strictly relying on the appreciated value of their investments to fund their retirement years. Sure, their investments have since recovered, but what did the really lose and at what cost?
TIME of course!
It is no consolation when you wanted to draw an income and find that you can’t withdraw as much as you had planned. Or worse yet you had to wait a few more years before you could afford to make any withdraws!
A Better Strategy – Cash Flow Today!
A better strategy…investments with streaming cash flow – today – like real estate for example. The cash flow from such assets would replace your income earned prior to retirement. You wouldn’t want sell these income producing assets. Even if they depreciated in value – the income continues to come in month after month, year after year.
The point is this… cash flow is King!
Consider mixing up your investments to include some that provide you a flow of income now! The cash comes in whether you’re working or not – this is what we mean when we say you can have your cake and eat it too. You can have an asset that will appreciate over time, but you don’t have to sell it to enjoy the income it gives you now!
In 2008, had the asset mix for many of these retirees, generated a positive monthly cash flow – like real estate or a good dividend stock would have, the decision to retire during one of the most severe recessions in recorded history would have been a little less painful and easier to cope with.
Financial Balance Point
The definition of a Financial Balance Point is this: “When the income from your investments equals or exceeds your work-related income.”
If you began to accumulate assets for the sole purpose of producing predictable, positive cash flow, would you redefine your investment choices? Clearly, you would begin amassing assets that provide cash flow today, as opposed to appreciation tomorrow. Don’t get me wrong…appreciation is a good thing…but not the only thing.
Asset Apprecition vs. Cash Flow
A recent chat with a friend will illustrates the point. He purchased a property in 1999 for $57,000. By 2006, the property appreciated in value to a whopping $235,000 – obviously a real estate market gone wild! Lets fast forward to 2009, that same property swung back to be worth $60,000 – a knee jerk reaction to an oversold market.
Asked if he felt he lost by this swing in value, his reply was, “Nope!” He went on to say, “These are cycles with no predictability, I didn’t care as much for the appreciation – that’s a bonus – and I am sure through the coming years it will slowly climb up again.” It certainly has…these properties are again approaching the value he had in 2006!
His original intention was not to purchase the property for its appreciation potential, but rather for its cash flow opportunity. “My cash flow went from $625 a month to now $975”, he remarked. “On paper, it seems like a massive loss of capital, but that was equity the market created – in its frenzy – and doesn’t impact me whatsoever. My actual cash in hand does affect me and increased through the years as the market itself adjusted for inflation. Now imagine multiplying the extra $350 in cash flow, times many properties, and you’ll see it becomes a very healthy financial situation.”
The property has long since been paid for, and it continues to provide positive cash flow for him each and every month no matter what the market condition is.
How about you?
How many of your investments are doing this for you right now? They may have gone down in capital value, but are they producing positive cash flow for you today?
Sit down and review your portfolio. Think about including some income producing assets – like real estate, or a good dividend fund. You can always reinvest the cash flow to buy more assets and free up your earned income to take care of immediate needs – like paying off your mortgage or other non-productive debts. Maybe even take a nice vacation and experience a trip of a lifetime!
Either way, STOP thinking about retirement, and start thinking cash flowing your living today and eat your cake NOW!