Gathering all of your information together in one place — Known more commonly as “Yer kiddin’ me, right?”

First off is your age(s).

This is crucial for many of the Captain Obvious reasons you’d suspect, but for some, other reasons as well. Under 40ish? The world is your oyster if you have at least starting capital, a reliable income, and reasonable financial discipline.

40-50? You can still kick major bootie in the arena of retirement income. You’ll just hafta get on your horse and hit the trail with serious intent. Regardless of those who’re constantly tellin’ us otherwise, real estate investing for retirement is definitely a contact sport. Never forget — one of the most important ingredients in every Purposeful Plan is FLEXIBILITY.

Over 50? That age group must pay rapt attention to three factors.

• You have access to investment capital

• You have the will to use it

• You realize that pesky birthday keeps showin’ up every dang year

If you’re already retired, but are deeply dissatisfied with your current income, you can probably count yourself among the younger age ranges. This is due to the real life fact that you are likely sportin’ a sizable amount of cash and/or equity in one form or another. It simply means you’ll be rearranging your net worth in order to better enjoy your many trips. That’s code for you hate your income now, and will move Heaven ‘n earth to double it if you could. If that hint wasn’t broad enough, that means you’re in bonds.

Under 30? At any one time this group represents around 10-15% of my clientele. Their potential for a magnificently abundant retirement is almost always virtually unlimited. Their weapons of choice are time and an almost always increasing income.

Next up — Make sure you completely understand what’s possible with your current 401k/IRA/Pension at work. For many this can prove pivotal. What can you borrow? CAN you borrow? Are they convertible to something else you’d prefer?

What about any annuities you may own? What are the terms — exactly? When do they kick in? Have they already kicked in? Is the income gonna be taxable or tax free? Is there a ‘cash value’ involved?

What do ya think of your current job?

This where the conversation can sometimes take a real turn into the Twilight Zone. They love it, but it doesn’t pay as much as another job they wouldn’t like as much. Or, it pays great, but I’m bored to tears, or worse, hate goin’ to work every morning. There’s a buncha different answers.

You should ask yourself the question if only to find out if you’d even consider making a change, if that change would enhance your actual retirement income, shorten the time ’til retirement, or both. It’s amazing what we’ll put up with when we’re focused and motivated. I’ve seen clients not only change jobs, but industries — then move to another state to boot. Ask yourself the question if only to check the box.

Are your retirement goals doable — are they realistic?

Here’s something I learned long ago that surprised me big time. About 30-40% of folks completely underestimate what’s possible. It’s understandable. After all, how is the average person supposed to know and understand all this stuff? Once you learn what’s possible, I’m bettin’ your approach will change too.

When I ask, “So, when would you like to retire?”, many quote me right back — “Oh, around 4:30 yesterday afternoon sounds about right.” If you’re 33 and can afford to start your plan modestly, retiring by 40 may be a tad ambitious. It’s all about playin’ the cards you’ve been dealt as wisely as possible.

Age can matter a lot, or not much at all. In the end though, age combined with beginning assets does matter when figuring the approximate distance to your personal finish line.

Then there’s ‘Whatever else pops up’

When you’re gathering information, it’s pertinent to include the fact that Uncle Henry will be gifting you $50,000 upon your 40th birthday. Or, that you and your three sibs plan on selling the house Aunt Frieda left you five years ago. There’s a million and one things that qualify as grist for ‘Whatever else pops up’. The point, is to include it if only to learn if it matters or not. You’d be surprised how many times my clients begin sentences with, “Oh, by the way, Jeff . . .” which have radically changed their entire Plan, or sent it happily careening in an entirely different direction.

BawldGuy Takeaway: I made Gathering Information a separate step for a good reason. More times than not a piece of that info can change an investor’s Purposeful Plan. It matters not whether it’s a huge change or not, cuz when you’re measuring time in terms of a decade or three, even small changes can result in wonderful results at retirement.

If you’d like to gather some info from me, it’s as simple as calling 619 889-7100. Rather jot me a note? Love to hear from you — just click the Contact BawldGuy button up top. Have a good one.

Why don’t people talk about real estate as a viable means for retirement?

It’s been part of my basic understanding of what I do. What with all the empirical evidence showing real estate is far safer, more reliable, and generates more wealth than the many alternatives, the vast majority choose everything other than real estate. Why is that?

I’ve had over 40 years to come up with a credible answer. People have figured out how to save money. Pay off their homes. Invest in stocks. Yet, they don’t go for the real estate. I don’t know how the ‘Invest for retirement’ pie is divided, but the percentage has to be single digit for real estate.

It doesn’t make objective sense. Americans flock to so-called qualified retirement plans at work that have been huge failures. The typical 50-something American (mostly male) has less than six figures in their account. Think they’re longing to retire? Or, are they hittin’ the panic button, their heads on a swivel as they frantically cast around for a viable solution to workin’ ’til they drop?

Based on my professional experience, most simply don’t think they can make it happen. They prefer the ‘experts’ provided by their employers, who guide them in choosing in what to invest for retirement, inside their 401k. By the time the results of that approach become painfully evident, it’s like runnin’ outa gas on the freeway in fly-over country. You thought you shoulda filled up at the last town, but decided it was easier to keep goin’.

How’s ‘easy’ been workin’ out for ya lately?

Real estate is simple on paper, just like every other route to a solid retirement. But, like most things in life, simple is the last thing it is once execution is the word of the day. The long and short of it is this:

Getting to a magnificently abundant retirement through real estate investing is anything but simple. Sometimes it’s a gigantic pain in the butt, and I’m being kind. However, if retiring well was easy it’d be like Grandma said — “If it was easy, everyone’d be doin’ it.

You’ve been goin’ down the Yellow Brick Road for how long now? There’ve been roadblocks, some scary, on the way to Retirement Oz. Yet it never dawned on ya what was waiting for you behind that final curtain.

Thing is, you ain’t Dorothy, and you’re not dreamin’. Retirement Oz doesn’t exist — and there’s no ruby shoes that’ll take you back home.

Ruby shoes AND callin’ me at 619 889-7100 will get things started on the road to a real retirement. Rather write me? Click on the Contact BawldGuy button up top. Have a good one.

We’re finishing up Step #3 in the process of creating a Purposeful Plan. In yesterday’s post we created an investor, giving them a financial ‘status quo’ based upon my ongoing experience. Turns out they have decisions to make about the potential sources of their investment capital.

The decision is crucially important.

In this virtual case study, it’s sometimes possible that this decision can and will dictate the quality of retirement possible. It’s akin to laying a building’s foundation. The larger, deeper, stronger, and more reenforced it is, the larger the building can be built. It’s how real estate investors begin that will often ensure success, failure, or merely mediocrity. Many times the difference in starting with more or less available capital can literally make or break the end game goal.

Factors they are considering.

If they chose to follow my Plan, they’d be starting with a about $310,000 or thereabout. If they can’t make themselves pull the trigger on cashing out their 401k and IRA, but sell Teresa’s stocks, they’d have about $175,000 — leaving them, in both scenarios about $40,000 for cash reserves. We’ll deal with the expected performance of the capital held hostage in the 401k and IRA a bit later.

Beginning with $135,000 in additional capital will make a huge impact on the ultimate net worth and cash flow they’ll enjoy in retirement, 20 years down the road. Think about it in a different context for a minute. What if you got a 77% raise at work? That’s the difference in seed capital we’re discussing here. That’s the reason Rod’s and Teresa’s ultimate decision on this point is so critically pivotal to the eventual quality of their retirement.

NOT my way

Due to Fanny Mae insanity, a decision to begin with the lesser figure of $175,000 means they can barely acquire $675,000 in income property. And by ‘barely’, I mean by the skin of their teeth. The only thing makin’ it even feasible is that there are relatively rare duplexes available, sporting separate Tax IDs for each side. This means they can be bought ‘n sold separately if desired. It also means Rod and Teresa can design their acquisitions such that three of ‘em can be completed using just 20% down.

When these properties are freed of their loans, they’ll throw off annual cash flow of roughly $50-53,000. The equity at that point would be $675,000.

BawldGuy Axiom: When planning for future net worth and cash flow, it is my policy, never to be violated, to assume that both property value and NOI (Net Operating Income) will never increase. Basing present strategy(s) and tactic(s) on assumptions of rising prices and/or rents (NOI) is folly at best, and the road to acute disappointment at worst.

There are other factors for which we can’t account today. Such as . . .

? How quickly will they be able to eliminate all income property debt?

? Will they be able to improve their position significantly by selling/exchanging for more property in years to come?

? Once free and clear of debt, what will the interest rates be then?

Here’s the Purposeful Plan I’d lay out for Rod ‘n Teresa — at least in part.

They’d immediately acquire 4.5 duplexes. The down payments would range from 20-25%, tilted slightly to the higher. If they never did anything else ’til these loans were all paid off, their cash flow and net worth would look like this. Keep in mind the policy of no increases in value or NOI.

Yearly cash flow would be approximately $90-95,000. Their free ‘n clear equity would be a tad more than $1.2 Million.

Being my usual OldSchool self, they’d be able to eliminate the debt on two complete duplexes in roughly 5 years, give or take. Since they’re high wage earners, i.e., they’re barred by the tax code from using depreciation against their ordinary (job) income, it’s a virtual lock their CPA would approve the depreciation strategy of Cost Segregation. This would result in impressive annual dollar amounts of unused depreciation, which would patiently wait to be put into the game.

Keepin’ this part brief, in the 5 years it takes for them to pay off a couple duplexes, they’d have accumulated something like $180-200,000 in unused depreciation. This would likely be used (Who knows? My crystal ball is as reliable as yours, right?) to massively turbo charge their EIUL.

Oh yeah, their EIUL

Given their household income of $190,000, and their already demonstrated financial discipline, I’d say a conservative EIUL monthly premium of $1,000 would be a justifiably prudent start. Remember, since they gutted their job related retirement plans, they were also advised to halt any further contributions. So this monthly premium would, in reality, add less than a few hundred bucks to their monthly outgo. They’d be redirecting contributions to Rod’s retirement plan at work to their new EIUL.

Think 20 years of these monthly premiums. Their only decision would be whether or not to apply annual inflation bumps of 2-3% to the premiums. Though I haven’t bothered David Shafer to do the exact analysis, my recent experience tells me the annual tax free income using just a flat, unchanging premium, would be approximately $50,000. We’ll call it $4,000 a month.

Somewhere during the sixth year of their Plan, we’d probably (We never know for sure.) sell the first two debt free duplexes, offsetting any capital gains taxes (and other taxes as well) with our saved up depreciation. Invoking the policy of no appreciation ever, that would yield tax free proceeds of $500,000 — give or take. Mr. Shafer would then structure a brand new EIUL, calling for 5 equal payments of $125,000 — payable in 4 years and a day. (Don’t ask, it’s a regulation.)

The two EIULs will combine to deliver somewhere around $120,000 a year in tax free income, no doubt into their 90s. It could be more, but I’ll leave that to Dave. Just a week or two ago we did this analysis for a couple pretty similar to this one, and the annual income ended up being much more than this.

So now, to be fair, we need to assume they never exchanged or did anything different than the first scenario. So the income from the 2 duplexes we sold must be subtracted from the total real estate cash flow, earlier mentioned. That figure would be about $48,000 a year or so.

What we’re not accounting for in either scenario is what Rod and Teresa do with the impressive cash flows they’ll have from the time all debt is eliminated to the time they retire. My guess, and experience tell me they’d turn their sights on any balance left on their primary residence.

Income 20 years from now — 1st scenario

They’d have about $50,000 a year from their real estate portfolio and likely the same, though completely tax free, from the EIUL. That’s $100,000 a year, half of it tax free.

The 2nd scenario

They’d be gettin’ about the same $50,000 annually from their remaining income properties, as in the 1st scenario. But due to the well timed use of multiple strategies — what I’ve come to call Strategic Synergism — Their tax free income from a couple EIULs will be around $120,000 yearly. This brings their total retirement income to roughly $14,000 a month, or $170,000 a year. The really cool thing to notice is that just over 70% of this income is tax free — by definition. Not after tax. Not tax sheltered. Not tax deferred.

TAX FREE. Over 70%. Put another way, the executing the Plan I advised increased the amount of tax free income, as a percentage of the whole, by 40%. This is huge, especially when it comes to retirees.

Total income is a whopping 70% greater in the 2nd scenario. And yeah, I know, the money they left in the 401k and IRA grew. Not by all that much though. Remember, it only got to less than $200,000 in the first 20 years or so, and that was with employer matches and them pilin’ in their own money every month.

Step #3, if executed with serious intent, can sometimes make or break a magnificently abundant retirement.

In the end, ask yourself this question, as you compare the two scenarios.

How much is your employer retirement plan gonna get you by the time retirement rolls around?

Don’t let the answer deflate you. Let it motivate you to talk to me. Just use the form below to start the conversation…

Today let’s talk about the third step of any Purposeful Plan.

Step #3 — Identify your source(s) of investment capital.

Seems self-explanatory doesn’t it? Much of the time it is. There’s the cash in the bank. Maybe some stocks here and there. Or, takin’ advantage of today’s historic low interest rates, maybe the home equity is calling to you to put it somewhere else. You know, to more effective use. But, what most don’t even consider, is where many have bunches of available real estate investment capital — A 401k or IRA from a previous employer. An IRA sittin’ dormant for the last few years. Your instincts stopped you from continually adding to it, but you’ve been stymied from that point for awhile.

The case for gutting your 401k or IRA

Let’s build an investor, OK? Rod and Teresa are in their early 40s. They’ve been relatively successful in their careers. Rod makes around $120,000 in middle management. Teresa, who took seven years off ’til their kids all hit school age, is a self-employed commercial photographer, making roughly $70,000 a year. Rod has a 401k from a previous employer with around $190,000 in it. Teresa rolled her old 401k over to an IRA when she quit to stay home with her babies. The balance is just under $85,000.

They’ve built their savings, during their 21 year marriage, to around $175,000, give or take. A little bit here and there, add consistent discipline, and before ya know it, there’s a nest egg. Then there’s the stock Teresa has from her last employer, which is worth around $50,000 in today’s market. It hadn’t really risen much, then 2008 crushed its spirit. But hey, it’s still money, right?

This is where I tell ‘em to gut both of those plans like freshly caught trout. “Why on earth would we do that?!” is the usual response. I’ll repeat one of my policies not subject to exception:

No advice to a client to do anything with their real estate investment portfolio should ever be given unless it’s a no-brainer, easy decision. The projected results should provide significant improvement to the portfolio. Not marginal improvement. Not even moderate improvement.

BigTime improvement — or don’t do it.

If they followed that advice, they’d net somewhere between 50-60% of the current balances. I know, it’s brutal. The combination of being taxed and penalized doesn’t leave much. But the real determining factor must be the end game — retirement income. If retirement is set for their early 60s, say around 20 years from now, what will deliver better results? Will it be the total of about $275,000 in those plans? Or would it be $135-165,000 or so, after taxes and penalty?

Most investors, if they’re objective about it, realize the performance of their work related retirement plan hasn’t even begun to cut it. What I ask them, is whether they believe they can accomplish two things.

1. Grow that $275,000 to at least $1 Million, while remaining inside the retirement plans.

2. Generate significant and reliable retirement income when needed.

Over the next 20 years their return would hafta be consistent annually to hit the million dollar mark. If they added $1,000 monthly, it’d surely boost annual yield. This assumes they started with the aforementioned combined balance of $275,000. That assumes no losing years — ever. If a repeat of 2008 comes their way, it better be a mild version. Makin’ up lost ground isn’t terrible cuz you need to generate larger yields. It’s cuz while you’re gettin’ back to where you were, you keep havin’ those pesky birthdays.

‘Course, if they actually do manage to amass that million bucks in the next couple decades (They won’t, but we’ll say they will.), what will the retirement income be? If those couple decades began 20 years ago, their income, using universally recommended vehicles like bonds, would be based on 2-3.5% yields. Put the ugly way, that means they’d be retiring on around $20-35,000 a year, before taxes. I’m impressed. Are you? Don’t answer, it’s rhetorical.

On the other hand, how might they end up, opting for half a loaf, but invested in real estate, with maybe an EIUL on the side?

We’ll use an after ‘gutting’, after tax & penalty net of around $135,000. Add Teresa’s $40,000 from her stocks (after tax). Take about $135,000 from cash savings. That gives ‘em roughly $310,000 or so. It also allows for $40,000 in their Sominex Account, which everyone knows, of course, is cash reserves.

Tomorrow we’ll put all this together, to compare reasonably predictable results. This is important, cuz ’til we decide the source of their investment capital, we can’t begin selecting appropriate strategies. This is a must in Purposeful Planning. That is, every step must be given very serious attention. Missed possibilities can rarely be recovered.

Step #1 in getting started is to use the form below so we can have a quick friendly chat about your situation…

However, while not ever giving advice, I continually find it amazing that when the “experts” speak of investment diversity, they always maintain such diversity within the arena of stocks, bonds and mutual funds.  In a recent article by Margarida Correia related to a recent study undertaken by SEI. A fund manager and investment management business outsourcing provider, the SEI found some common sense opinions currently held by investors.

The Study

Specifically, in the study, investment advisors say their clients’ account portfolios have largely rebounded from the debaucle of 2008.  In fact, 10% state that their clients’ portfolios exceed the level they held before the recession.  However, the biggest worry held by the clients is that they fear another “significant” market decline.  This opinion was held by 60% of the respondents.

As expected, the following information will not surprise anyone.  The findings showed that approximately one-third of the advisors use a 60/40% portfolio strategy to manage their clients’ assets.  The “60/40″ definition means that they allocate 60% to stocks and 40% to bonds and other lower-risk securities.

What I found surprising is that very few investors worried about making bad investment decisions (3%) or running out of money when keeping up with inflation (7%).  As expected, they did have concerns related to how much income would be needed for retirement years.

Not a surprising study, to say the least.  But, what I continue to find surprising, is the lack of reference to whether these financial advisors ever recommend that their clients invest in non-traditional assets.  While clearly not meant for everyone, it seems as if advisors are clearly steering down the “let’s just do what everyone else does and hopefully things will work out for the best” model.

This post is not to suggest, recommend or otherwise advise that anyone invest in non-traditional assets.  However, there is an old saying that sometimes more (investment options) is better.

BawldGuy Here: Let’s poke around this study a bit, OK?

First, it has advisors saying their clients’ stock/bond portfolios have either returned to their pre-2008 collapse values, or are now above that figure. Yet, 60% of their client-investors express concerns about another significant market downturn. But that’s predictable, right? What’s confounding is those same clients’ worrying about their retirements, given the proven dismal track record they’ve experienced first hand.

Really? They’re concerned? Enough to switch horses before they find themselves in the deep rapids, sans horse? But that’s not all.

If you know that your advisor was constructing the contents and mix of your retirement portfolio, and strategies to be applied based on the majority of his clients’ wishes, I has one itty bitty question.

Why on earth do they even need that advisor then?

Every year, without fail, I lose potential clients due to my policy of tellin’ them when their understanding about various strategies are either mistaken or misplaced, and will eventually harm them. It makes no sense for me to be a part of a losing strategy when I know in advance how ugly it could end.

Yet millions continue to follow the advice of those who’re blithely, one might say cynically following what the masses ‘believe’ is wise. That might be the most damning piece of evidence I’ve seen when it comes to understanding why most folks retire poorly. At the least it’s sad, and if truth be told, it’s been tragic for most.

Great stuff, John — Thanks.

It’s fun watching conversations go from, “I think we can do this little bit” to, “We can do that? Really?! Sweet.”

I’ll be talkin’ soon about a youngish couple who’ve now been clients for a short few months. They’re textbook examples of what happens as real analysis weaves its way through the financial forrest of facts and fiction. When I say fiction, I mean in the sense that sometimes we find what we thought was this way, is actually the other way, plus a couple right turns. Add a little knowledge, a little expertise and experience, and before ya know it, KaBoom! Your Purposeful Plan is suddenly bursting with the promise of a magnificently abundant retirement.

As long time readers here know very well, I’m an addict to this stuff. Nothing beats sharing the fun epiphanies of first timers or those with just a bit of experience, as they begin gettin’ a glimpse of what’s truly possible. It’s amazing what happens when knowledge/expertise/experience meets desire/discipline/determination.

I wouldn’t trade those sudden moments of clarity for anything. They’re priceless, and the real pay for which I work. Gettin’ regular folk from where they are when we meet, to the retirement they’ve envisioned is more fun than I can convey. What I do is the furthest thing from work.

Try to imagine the thrill of tellin’ a 30-somethin’ mom that she has enough cash flow to become a stay-at-home mom with her two year old. Absolutely freakin’ best day of that year, no contest. I was walkin’ on air for a week.

If you’re 45 or younger, start the process of clearly understanding where you are now, financially. Sit down and apply truly serious thought to when you’d like to retire, and with how much income. DON’T prejudge what’s possible.

Over 45? Do the same thing — but double time it.

Once you’re done with that, gimme a call at 619 889-7100. Click Contact BawldGuy up top if you’d rather write me. Together we’ll figure out what it’ll take to get ya from today to the best retirement possible. Have a good one.

If you know the yield on invested capital will be 10%, what’s better to have — $100,000 in 5 years — OR — $55,000 today?

I’ll leave the answer to you.

A reader made a comment. He asked if the income from an EIUL I’d quantified, was present or future value. The income was structured to begin 25 years from the inception of the policy.

My answer

Since it’s not realized for 25 years, it’s definitely not present value. A fair analogy would be those who use present dollars to buy real estate, borrowing more present dollars to finalize the acquisition. They plan to retire after slowly but surely paying the loan off with future cash flow + future job income, resulting in future debt free cash flow.

Much like the EIUL, real estate cash flow in retirement is, necessarily not ‘present value’.

Your question points out a downside to all cash flow generated by long term investment. We can never really know/understand the present value of future cash flow — at least until we’ve arrive at a particular point in that future. We can impute the unknowns in the equation to estimate it, but that’s all it would be, an estimate. Will it be worth more or less? The normal answer is that with assumed inflation, future dollars will be less valuable.

The thing is, though, the question you’d really like answered, is this.

Real estate values have, historically, pretty much tracked with inflation. The same is true of rents, more or less. Add the second retirement income basket that generates tax free income (EIUL), and you’ve successfully, at least to a great extent, insulated yourself from the dollar’s erosion.

The reason tax free income from the EIUL helps fight inflation, is more practical in nature. If your state/fed combined tax bracket is around 30%, this means the $100,000 EIUL annual income represents the equivalent of around $143,000. (just under) ‘Course, all that means to the real estate investor whose portfolio sports an EIUL, is that over a period of 15-35 years, retirement cash flows subject to taxes must be higher to produce the same income as those cash flows which escape taxation.

And the congregation replied, Duh!.

BawldGuy Takeaway: As Captain Obvious would say, “All retirement cash flow is, for those yet to retire, by definition a ‘future value’.” When a portion of that income is tax free, it effectively has helped shield the investor from years of inflation by the avoidance of taxation.

Therefore: In the above example, $100,000 of tax free income equals roughly $143,000 in taxable income. The major scoop here?

Tax free income in retirement is incredibly cool.

It’d also be cool if you called me at 619 889-7100. Rather write? Just click the Contact BawldGuy button up top. Together, we’ll figure out how to get you to the retirement you’ve always wanted. Have a good one.

I don’t think so.

Let’s say they retired a year or two ago, and have most of their liquid capital in bonds. How discouraging it must be to have managed to save $1,000,000, yet it generates only $20-30,000 a year. Adding insult to injury, it’s tax time about now, and their CPA just told them how big the slice of that unimpressive pie the government is about to take.

What could they do with that million bucks?

I thought about drawin’ this out, but let’s have mercy today. If this couple holding these bonds followed my advice and paid cash for some of the superbly located Texas properties I like so much, they’d be able to get outa the house and live.

Those properties would generate around $6,000 monthly — and a sizable minority of that income would be tax sheltered.

Then there’s the ability to score some cash, which with bonds can be expensive in more ways than most realize. They can incur a taxable gain. They can incur a capital loss. With real estate, however, they simply show the lender their 100% equity position, and voilà! there’s money in their account. Best part?

It’s not even a taxable event.

But wait — there’s more. It could be better — much better.

In upcoming posts, I’ll be talking about the choices bond holders have to make. The BawldGuy ‘No-Brainer’ policy applies to switching from bonds to real estate as a retirement income strategy. But only if the bond holder believes 2-4 times the yield is indeed a no-brainer.

Here’s a no-brainer for ya. Gimme a freakin’ call. You’ll reach me at 619 889-7100. Rather write me? Go up top and click ‘Contact Bawldguy’. Have a good one.

Now compare that advice to this out of Warren Buffett’s letter to shareholders that came out last week.

Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur.

Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control. Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”

Let’s review.

The financial planning community advices an increasing dependency on bonds, while Mr. Buffett suggests that the risks are huge in this investment and points out that these instruments routinely destroy purchasing power of those who invest in them.

The financial planning industry claims to know how you can best build wealth for retirement. Do you believe them? Or do you think Warren might know a little something about investing and building wealth?

Ready to go off the reservation and do some things that the financial planning industry thinks you shouldn’t?

BawldGuy Here: First off, it’s so good to have David posting again.

Bonds have been acutely interesting to me for a very long time. But these days I’ve come to look at them as retirement poison. Imagine a person retired or about to. They’ve put most of their nest egg in bonds. They’re now gettin’ between 2-3%. Whoopty do — let’s have a party. The same money in a property using 50% down to buying for cash, would easily yield 2-5 times as much. This is accomplished in a matter of 1-4 weeks. I’ll be writing on this topic later this week.

Bodybuilding

You promise yourself to get fit, and bodybuilding will be a key factor in your plan. You research everything. You find out about all the many schools of thought. You opt for a full body workout three days a week. After awhile you begin to notice a good news/bad news scenario developing.

The good news is, your body is really lookin’ good. All the right places are showing muscle growth. Your wife begins feeling your biceps every now and then while smiling demurely. The bad news? The fact you’re getting stronger every week has resulted in your ability/need to employ heavier and heavier weight during your workouts. Though your strength keeps increasing, and your muscles look bigger and better each passing week, you’re also beginning to wear down.

Why?

Think about it. You’ve been training shoulders, arms, back, abs, and legs each and every workout. The arms have biceps and triceps. Shoulders have front/back/side deltoids. Then there’s upper and lower back. We all know abs demand effort. Your legs? A major energy drain. There are squats as the foundation. Then your hamstrings. And don’t forget your calves like most do.

It’s a ton of work, pun intended.

It’s different for everyone, but at some point we simply can’t do a full body workout thrice weekly. The reason is we’ve succeeded. We’ve become too strong to effectively give full effort to every body part that often. It literally wears you to a frazzle. Been there, done that. You end up feelin’ about a quart low all the time.

You never thought or even suspected that would happen. ‘Course, if you’d known to ask the question, the answer would’ve helped you steer clear of what often results in muscle and/or ligament/tendon injuries.

Though the injuries in most cases would be more irritating than serious, they would certainly have been avoidable had you known the almost guaranteed consequences of the full-body strategy. You rest awhile, then resume working out, but with a more informed approach. No doubt you asked your bodybuilder buddy what he might recommend.

In real estate investing, the answers to those unasked questions can come back to make your life miserable. Unlike a few worn out and sore muscles, your capital isn’t just ‘injured’, some of it is gone.

BawldGuy Axiom: It’s the answers to the questions we never knew to ask that come back to haunt us. What solid pros bring to the table is not only what those questions are, but the answers too. Those answers, more often than not, are crucial to gaining the best results.

Long term real estate investing, especially for retirement, is fraught with details of which most folks are completely unaware. It’s not their fault, as they can’t search for what they don’t know exists. It’s a paradox of sorts, isn’t it?

You realize there’s information out there you must know to succeed to the degree you desire. It’s not that you don’t know what box holds the info you need, you don’t have the slightest idea in what building that box is hidden.

Your retirement is far too important for the Do-It-Yourself approach. The answers to all those questions you never knew to ask will eventually catch up to your portfolio. When that happens it’s almost always after the horses have left the barn.

How important is the size, stability, and reliability of your ultimate retirement income to you? How crucial is the timing of your retirement? How many questions do you think you never knew to ask? What impact will not knowing the answers to those unasked questions have on your retirement?

Tick tock.

Did someone say tick tock? It must be time to gimme a call. You can reach me at 619 889-7100. Wanna write me instead? Just click on the Contact BawldGuy button up top. Have a good one.