Begin to think of ‘streams’ the way you think of ‘portfolios’. That is, one stream is completely separate and independent, and different in nature than the other streams.
Today, let’s talk about different streams of income in retirement. Most people think that different streams means that you’re going to buy multiple pieces of real estate. They might have some income from a 401k when they retire, although that’s highly debatable. Let’s take a little side track just for a few seconds on that one. Today, like every day since January 1st, 2010 and continuing every single day until the last day of 2030, a minimum of 10,000 boomers are turning 65 years old. The average boomer’s balance in their 401k at work is usually under six figures. They’re not going to retire on that. That’s why they’re coming in to the note market in such great waves. When it comes to different streams of income, for retirement, you want to set this up as early as possible, as long of a timeline before actual retirement as possible for your circumstances and the reason is, you’re going to end up with these vehicles giving you retirement income because you invested in them long term. However, you can use them synergistically, with each other in combination, if you know what you’re doing. For instance, you can take after tax income from notes, that you want in your own name that you bought at a discount, and you can use those to retire real estate debt much earlier than what would have been the case otherwise. On the other hand, you have a self directed retirement plan that can buy notes that are discounted also. Those grow, not only tax free, but every time they pay off and you make that profit, because remember you bought it at a discount; you bought it for less than was owed. An example might be a $40,000 note that you bought for $32,500. Right there is a $7,500 profit that you’re going to realized when that note pays off at some point, if its inside a retirement plan, whether its pre-tax or a ROTH, you want to get a ROTH, those profits in either one are not taxed so that’s another source of income. Now the reason you want a ROTH is that when that dollar comes out in retirement, it’s not taxed at all, ever. So do you want to be retiring on 60-75 cent dollars from a pre-tax retirement account that’s self directed? Or do you want to retire on hundreds of dollars from a ROTH? It makes a lot of sense. Then you have another income stream, potentially, in what we call an EIUL insurance policy. All that stands for is Equity Indexed Universal Life. It’s a life insurance policy that’s not geared for giving you a benefit when you die so your heirs are protected. This is to generate tax free income for many, many years when you retire. So understand, when you’re going to get multiple streams of retirement, you want to plan ahead.