How many times in life have we discovered we’ve been completely wrong about something for which we had no doubt whatsoever? Sometimes what seems to be a no-brainer, just ain’t what it seems to be at first glance. This happens in sports all the time.
I remember a conversation long ago with my son when he was in Little League. Being a diehard Padres fan, he loved Tony Gwynn. He was flummoxed upon learning Cecil Fielder made almost twice as much money as Tony. After all, Fielder hit .255 lifetime, while future Hall of Fame member Gwynn hit .338, winning more National League batting titles than anyone in well over half a century — eight. Heck, most years all of Major League Baseball hits .250, give or take.
In a sane world, how could Fielder be paid, much less be worth more than Gwynn? It seems ludicrous on its face, doesn’t it?
First of all, let me assure you, Fielder was indeed worth millions more than Gwynn. And sure, Tony’s salary reflected what’s been known for decades as the San Diego discount. Even with that factored in, he’d never of been paid what Fielder commanded even if they were on the same team.
Why is that true? Prepare yourself for an ‘ah ha’ moment.
The answer is found in the answer to another question — ‘How is it decided who wins a baseball game?’ Hint: It has nothing to do with who has the most hits, or what team has the highest batting average. It’s simple right? The team with the most runs at the end of the game is the winner.
Cecil Fielder averaged 111 runs batted in every 162 games (a full season) for his career. Tony Gwynn? He knocked in over 100 RBI just one time in the 20 years he played. Major League teams pay the most to those who consistently put runs on the scoreboard. They don’t care if he barely hits his weight, as was true with Fielder. Prolific RBI guys are gonna out earn high average singles hitters pretty much every time out. Put another way, it’s all about winning — and winning means scoring more runs than the other team — period.
But how does this translate to real estate investing for retirement?
Let’s go Back To The Future for an example.
Jack was 30 years old in 1965, making about $6,500 a year, roughly the median income for the country back then. You and I go back in time to give him the choice of the following to retirement scenarios.
1. We’ll guarantee him a pretax retirement income at age 65 of $35,000 a year. He’ll have that income from the day he retires ’till he dies.
2. He buys the duplex down the street that’s for sale. He then rides the real estate cycles for the next 35 years. He retires on the cash flow generated from the portfolio he’s carefully built.
Knowing human nature as you do, guess which option he picked? Yep, the $35,000 a year guarantee. If we’re fair though, why wouldn’t he? It’s over five times what he’s making ‘now’, right? Who wouldn’t have opted for the guarantee?
Fast forward to 35 years later. It’s 2000, and he’s now retiring — on less than $3,000 a month — before tax. Move 10 more years down the road to 2010. How do you think that choice is workin’ out for him these days? Wanna change places? No? Didn’t think so.
So many think their Social Security check and the cash flow generated by the pile of cash they’ll surely have 15, 20, or 30 years from now in their 401K will provide the retirement income necessary to meet their expectations.
Fact: The average 58 year old American has less than $70,000 in their 401K.
How does that compare with yours today?
Fact: Even with a debt free home, not a universal reality by any stretch, they’ll eat through that 401K so fast their heads will spin.
Fact: There’s a chance Social Security won’t be there when you retire. Or that it won’t kick in ’till your in your 70′s. Or….
Fact: Sometime in the 5 year period immediately preceding or following your retirement date, the stock market will plummet. At that point your retirement will have been maimed. The only question is when, not if. It’s gonna happen, and nobody can do anything about it.
Learn from this and take control of the planning for your retirement. Do things on purpose. Hey, I know, let’s call it Purposeful Planning. Yeah, that’s the ticket. 
Whatever ya do, don’t be Jack. His decision resulted not in living out the retirement he expected, but instead, what amounts to a life sentence. And there’s nothing, as in zip, zero, nada, he can do to change that reality.
Jack thought the choice was obvious.
I’d love to talk with you about what kinda retirement is possible, given your circumstances. Gimme a call at 619 889-7100, then wait for it — “Hi, this is Jeff”. Have a good one.
Related posts:
- Why Are 401(k)’s The Wrong Way To Go?
- Over 50 And Going Down The Wrong Road To Retirement? There’s Time — Smile
- The Art of the Possible — Turning Dead Equity Into Growing Capital
- Real Estate Investment Choices: You Want a Clean $10 or a Dirty $20?
- Beware the Trojan Horse — 401(k)’s & IRA’s — Learn Now or Pay Later
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