In the first two parts of this series, I outlined my retirement planning which started in 1984 and showed how my plan was on track through to 2007. And then what happened? Complete turmoil, real-estate bubble burst, economic downturn, first broker/manager leaves his firm for violating rules and hands me to a second one, who also leaves his career due to stress, passing me to a third. By 2011, it looks hopeless to get back on plan and I am looking at where I will be if I have to recalculate with the contemporary numbers I outlined in part 1. Thanks to the new normal and the market corrections I am actually behind where I would be, even if I had used today’s bleak numbers when I started in 1984. In other words when you factor in so called market corrections, like 2002 and 2008, today’s normal is the normal and was the normal.
Projecting those bleak numbers out from 2011 it appeared that I was going to have to adjust my plan in a totally new manner. A suggested adjustment I was hearing from money managers, from our government and from many of my friends and colleagues was that the answer to bad retirement planning and performance is to work longer and contribute more. No one should expect to retire at 59.5. Your 60’s is the new 50’s. Nope, not for me it isn’t.
So, in 2012 I started pulling the plug on stock market investing. Since I am essentially self-employed, an employee of my own chapter S corporation, I could create my own 401k plan and in doing so allow investments in other than just stocks and bonds and products made available by Wall Street vendors. Instead I chose to buy an investment I understood and one that was at that time at the lowest I could ever see it go. I took about 60% of my nest egg and bought real estate. Not REITs but actual 3 bedroom homes in the Sacramento area. Homes that I chose, in an area I chose, at a price point I negotiated. I hired a property manager whose decisions I direct and had them rented to tenants I approved at rental rates I determined. This is all inside my tax deferred 401k plan.
And in part 4, the last of this series, I will show how this new plan has performed and where I project to be for retirement and more importantly when.