It’s all too easy to postpone financial planning and retirement while you’re young. After all, it’ll all work out in the end, don’t you think?
But on the off chance things are not going to plan, do you have an alternative plan for the future?
That is the flaw in that strategy: things rarely go as planned, and, if they don’t, you and your family are going to be in a lot of trouble.
Nobody wants to work until they die, and you probably don’t want that either. You may have dreamt of sipping cocktails on a beach, lounging on a veranda in a luxurious mountain retreat, or seeing the world in your retirement. However, reaching these objectives will need careful budgeting.
Zorya of BREI Properties joined Edna Keep on Episode 141 of 7 Figure Real Estate to share details about her journey to financial independence.
About the Episode
In this episode of Mothers of Multifamily, Edna Keep who is a seasoned real estate investor herself welcomed Zorya Belanger, a mother of two and a real estate investor. She also happens to be a former professional engineer who has devoted a lot of her time to real estate investing since the birth of her first child.
Zorya and her husband Patrick own BREI Properties. Patrick, who has been investing for over six years, is focused on joint ventures, single-family, and multi-family properties. They are in charge of a $5 million property portfolio. With the purchase of a fresh new 6-unit building last year, they doubled their number of doors. Zorya is also the co-founder of REMM, the Real Estate Moms Mastermind, a helpful support group for moms in the real estate industry.
Zorya talks about how she keeps up with her amazing portfolio along with her family life and mentions the importance of a support network. She talks about how her husband is the main provider for the family while she focuses more on their financial planning for retirement through multifamily real estate investments.
Listen to the full episode here.
Now, let’s discuss 10 reasons why financial planning for retirement is crucial and you should start now rather than postponing it!
1. Work is not Forever
You may be rebellious and believe that you can work till you drop, and although that may be ideal for some, the reality is that you cannot function at a high level in your job for the rest of your life. You’ll slow down as you become older, and certain jobs will become more difficult.
There is no justification for not saving for retirement, no matter how much you want to work for the rest of your life. You’ll be better prepared if you retire earlier than expected if you have more money on hand. You’ll be locked in your “work forever” plan if you don’t have retirement savings to fall back on.
2. Increasing Life Expectancy
Because individuals are living longer on average than past generations, the first topic to address is retirement. You’ll need more retirement funds to live off of if you live a longer life. Given that the average life expectancy in the United States is now 80 years, it’s clear that you’ll need a significant quantity of money to live well in retirement.
This is especially true since, while the average life expectancy is already nearing 80 years, people frequently live much longer. If you’re fortunate enough to fall into the above-average category, you’ll have to save for retirement for longer than you intended. That involves putting aside more money and making longer-term plans. The sooner you start, the higher your odds of having enough money for retirement to last your entire life.
In other words, don’t plan for an ordinary lifespan; prepare for a longer one!
3. Plan Ahead So You Have One Less Worry
We all have things that we want to do and places we want to visit in our lifetimes. There’s a good chance that during your professional career and early life, you’ll have a lot of obligations at home that make completing them tough. There are many things that hold you back, whether it’s your profession, raising a family, or other situations and life events.
Retirement is the ideal time to pursue those locations and experiences you’ve always admired in images or films but never had the chance to experience for yourself. You may now gather these experiences and participate in events that you were unable to participate in throughout your career.
One of the best things about retirement planning and having a comfortable retirement is that you may be completely present. You don’t have to be concerned about returning to work or anything else. You have complete control over your time. Whatever aspirations you had for your life, retirement is frequently the best time to realize them, but only if you prepared ahead of time.
Otherwise, you may miss some experiences and fail to cross off items from your bucket list.
A solid economic retirement plan relieves stress and helps you to achieve your objectives. Your money will free you up rather than constrain you if you have a solid retirement fund.
4. You Never Know What The Future Holds
It’s critical to recognize that you may have financial difficulties in the future. People are frequently positive about their financial futures, believing that things will improve in the years ahead, but this is not something you can count on.
Your future is uncertain, which is why retirement planning is essential. After you’ve made a decision, commit to it. If you run into financial difficulties later down the line, fight the urge to dive into your retirement funds, so that it’s there as a backup plan if you need it. Bear in mind that taking money out of your retirement account might result in fines, so you’ll want to preserve it for your actual retirement.
This shouldn’t diminish your enthusiasm about retiring. Rather, it should emphasize the need to have a strategy in place. There may be roadblocks in your life, and you may run into financial difficulties–having a retirement plan will put you in the greatest position to cope with these problems.
5. Retirement Savings Can Benefit Your Family Too
Giving back to your family might be part of your ideal retirement. If you have a sizable savings account, you may be the parent or grandparent that lavishes gifts on your family, such as taking your entire family on a major vacation or purchasing a vacation property to pass down.
It also makes it easy for you to constantly be present for major events. Knowing that you will always be there for your family when they need you will mean a lot to them.
It’s also not necessary for your retirement money to end with you. You may have a lovely surprise to offer your children or grandkids when the time comes if you’ve prepared wisely and have a good sum set aside for retirement.
On the other hand, picture your future with your family if you didn’t prepare for your retirement. It would then be the obligation of your children to look after you. You should not be reliant on anyone, let alone your own family, in your retirement.
Having a solid plan in place will ensure that you do not become a financial strain on those you care about. You want to be able to assist a family member in their financial predicament, not exacerbate it.
6. Invest in Passive Income Sources
Passive income is a way of making consistent money with little to no work daily. It’s important to note that we didn’t state “no effort at all.” Passive income is not a sit-on-your-buttocks-and-make-quick-money scheme. You’ll have to put in the effort, at least in the beginning. Building a blog or an app, for example, takes time (and often money) to get up and running. However, if you play your cards correctly, you may be able to earn while you sleep.
One of the best passive income sources is real estate. A multifamily property is a structure that houses two single-family homes under one roof. Duplexes, townhouses, and various types of condominiums are common examples. Multifamily buildings come in a variety of sizes and designs, but each unit will normally have its living room, kitchen, and bathroom.
The option to live in one apartment while renting out the other is what makes multifamily buildings so appealing. An investor may theoretically live mortgage-free while still enjoying the personal and financial benefits of homeownership by renting out the second apartment at the proper price.
Benefits of investing in multifamily real estate include:
Cash flow during the property’s lifetime
Apart from a retirement plan, a multifamily real estate investor will give you a consistent cash flow. The monthly rent payments minus expenses create this passive revenue, which is delivered to investors monthly, quarterly, or annually. You’ll be able to reap the benefits of your investment almost immediately if you use the cash dividends to boost your income or put them toward other investments.
There are several tax advantages to owning real estate, even syndicated multifamily complexes. While distributions from a retirement plan are generally treated as earned income, passive profit made by rental properties is usually taxed. That said, it can sometimes be offset by depreciation and recapture, mortgage interest expenditures, capital upgrade costs, and so on.
Improved capital appreciation management
When it comes to capital appreciation, retirement plans are sometimes at the hands of the financial markets. Multifamily housing investments, on the other hand, maybe “driven” to appreciate by remodeling older buildings, raising rents, and introducing fees for services and amenities like parking, pets, laundry, and garbage collection, among other things. This can help you earn a higher rate of return while also mitigating the effects of inflation throughout the life of your investment.
Lower inflation risk
When compared to many other investments, such as retirement plans, multifamily syndication provides a stronger long-term inflation buffer. Real estate values often grow in tandem with the price of other things, so your money is less likely to lose value if you decide to sell your syndicated ownership.
Diversity reduces risk
Diversity is one of the most important investment strategies. Multifamily syndication is a wonderful method to diversify your portfolio by investing in a variety of syndications in different types of properties and areas while only owning a tiny portion of each.
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7. Social Security Might Be A Risk You Don’t Want to Take
Even though you are eligible for regular OAS and CPP compensation checks once you retire, these benefits are unlikely to provide you with the enjoyable retirement you want. Your retirement assets will supplement your OAS income and provide a safety net if government support is repealed.
OAS and CPP are meant to supplement your retirement income rather than replace it. Pensions may not be enough to sustain the kind of life you’ve grown accustomed to.
If you need long-term care later on in life, effective retirement planning is essential. Government healthcare may not cover all types of care, so you may need to use your retirement assets to pay for in-home care or a long-term care facility.
8. Saving For Retirement Isn’t Difficult At All
If your finances are in bad condition and you’re barely scraping by, you might not have any money set away for retirement. Where are these spare funds going to come from? The truth is, you already have them all you need to do now is shift your mentality.
No matter how dreadful things appear, if you can make saving money a priority it will help to prepare for your retirement. Some people have a harder time saving money than others, but it’s always more about attitude.
Another typical stumbling block is time, to which we all have the same response: you have it. If you make your retirement a priority, you’ll find the time to establish a plan for your future and be driven to keep to it.
9. You Can Pay Fewer Taxes
Sadly, taxes may wipe out a significant portion of your income and assets throughout retirement if you aren’t diligent. One of the most essential reasons to plan for retirement is to avoid paying taxes.
Your retirement tax approach should begin during your working years. However, once you retire, the tax methods you used while working could be radically different. Both are critical, but how you go about approaching them is vastly different.
When you work, your income is pretty consistent, and you may not have complete control over your income. As a consequence, obtaining tax credits and deductions to lower your tax liability is critical.
Pay attention to RRSPs
Contributions to your employer’s RRSP plan can cut your tax liability, saving you money right now. You may be allowed to deduct your eligible contributions up to the yearly maximum.
You could also use a TFSA to construct a tax-free savings account.
The more control you have over your income sources after retirement, the more likely you are to be able to lower your taxes.
Because it’s hard to forecast future tax policies, diversifying your sources of income in retirement might save you tens of thousands of dollars in taxes. Saving money on taxes is a great incentive to plan for retirement.
10. The Best Time To Start is Now
You must start thinking about retirement as soon as possible.
Based on your salary, building up the assets you’ll need for a decent lifestyle might take decades, and after you’re retired, you’ll require a substantial savings account. If you begin saving for retirement early in your employment, your assets will grow and evolve, providing you with sufficient money to meet your retirement goals.
The good news is that it’s never too early to start thinking about what you want to do when you retire.
As you can see, there are several reasons to get started on retirement income planning.
It requires a proactive approach to reach your retirement goals. The sooner you begin financial planning for your retirement, the better off you will be. There are hundreds of ways to make the most of the next 25 years or more to prepare for your retirement.
Listen to the full episode of Moms of Multifamily with Edna Keep and Zorya Belanger here.