06 Dec IRA Tips for Real Estate Brokers
The Easy Way to Retire a Millionaire
I was helping some of our brokers get their 401(k) accounts set up when I came across this article in INC (http://www.inc.com/john-boitnott/7-quick-ira-tips-for-entrepreneurs.html) about setting up retirement savings for entrepreneurs and the self-employed. As real estate brokers, we’re used to being fully responsible for our income, taxes, expenses, and everything else. But it’s easy to forget that we’re also 100% on our own when it comes to retirement. There won’t be a pension or retirement account unless we set it up ourselves.
Living on commission income can be stressful, and it’s easy to spend an entire commission check on ‘essentials’ before you think of putting away for retirement. I recommend paying yourself first. Just like a utility bill, your retirement account must be paid every month, and it should be paid before anything discretionary. The easiest way to accomplish this is to have a portion of your commission be sent directly to your savings or other retirement account.
Since most brokerages aren’t able to offer a 401(k), the best starting place for most brokers is to max out a Traditional or Roth IRA (as listed in the linked article). An IRA is the easy option to put away up to $5,500 a year. Set up direct transfer with your bank so your contribution goes in automatically each month.
The biggest thing to keep in mind, especially for younger brokers, is that compounding interest will make a huge impact over the long term. If you have 30-40 years until retirement, the impact is enormous. For example, if you were to save $1,000 a month at 10% interest for 30 years, it would be worth $2.2 million. If you have a longer horizon and do this for 40 years, it would be worth $6.3 million. The younger you start, the bigger the growth.
Keep in mind, Warren Buffett didn’t become a billionaire until he was nearly 60 years old, but through compounding interest he’s now worth an estimated $89.5 billion. Keep saving, set a long horizon, and you can easily retire a millionaire.