Sometimes we get too clever for our own britches don’t we? Planning for retirement is not for amateurs, but the principles aren’t rocket science. Income, cash flow, it’s all the same. As long as it’s in my bank account at the end of the day, I’m good to go.

Let’s review what any kind of investment cash flow really is.

First we have capital, which is a word used to avoid saying cash a thousand times. We have less or more cash than the next guy. The principle remains the same though — cash flow, i.e. income, is just a yield generated on your capital. If you put $10,000 in a 3% CD you’ll make (most simply put) $300 in cash flow. If you put $1,000,000 in the same CD you’ll make $30,000 — same CD, just more capital. Again, it’s not rocket science. The point is, you’d rather have the later than the former. Ya think?

So if you’re in the age range 30-55 and have either the cash or the home equity to get started investing in real estate. Your goal will be to grow that original capital as quickly, yet safely as possible, until it’s time to retire. At that point you’ve grown your starting capital to an impressive amount. This is when you convert your Plan to generating retirement income.

See? It’s not M.I.T. level math. Actually, with the exception of what I do with properties I’m thinking of putting clients into, most investment analysis (math) is at or below the eighth grade. Sshhh! Don’t tell anyone I said that in public — I’ll lose my secret Super-Sophisticated Investment Analysis decoder ring.

All retirement income — is a yield on your capital. (And here comes the Captain Obvious Duh! statement.) The investor with the most capital retires with the most income. Again — this isn’t rocket science. I was never on M.I.T.’s short list for recruitment, and I get it. I’m sure you do too.

So the unspoken message is this: Forget cash flow as a primary target while you’re building your capital. This is because — ALERT! Here comes an investment axiom.

To the extent you go for cash flow you retard your ability to grow. Repeat — Going for cash flow will slow your capital growth. Do it as a regular practice and folks who don’t violate this axiom will pass you by like you’re standing still. Think of it this way — every dollar of cash flow you receive while trying to grow your capital will reduce your retirement income by significantly more than that dollar. Ask yourself: Would I rather have a dollar of income now, or two, three, or four dollars of income at retirement? You can’t have both.

Also, it matters how you invest, in what vehicles, with what timing, using what financing, and if you’re aware of the potential before and after tax consequences of your actions. (Tax deferred exchanges aren’t always the be all end all.) Real estate is pretty cool, but there is another basket you should be aware of — and one you should avoid like the plague.

But that’s another subject and another post.

Build your capital from whatever it is today, to as large as you can — safely. In anticipation of retirement, modify your Plan to generate cash flow, not growth.

Pretty sophisticated, eh?

Not really. Don’t get me wrong though. Those who invest without the advice of professionals rarely come close to equaling the pro’s results. But in the end, it’s doesn’t rank with putting a man on the moon.