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Why Real Estate Brokers/Agents Desperately Need Retirement Planning

Life is a treadmill for busy real estate professionals, not unlike other self-employed professionals. Keeping up with accounting, marketing, public relations, existing and pending clients, listings, showings, internet presence maintenance, transportation, continuing education, marketplace trends, and that’s all before any time for pressing family and personal priorities.

It’s no wonder today’s realtors are saying they feel overwhelmed and without time to attend to something that seems so mundane and far removed from the equation of daily survival like retirement planning. Trying to keep all the plates spinning at once is hard enough, don’t throw me any curve balls right now. But if you want to grow trees, (or an orchard) there are only two good times to plant — twenty years ago — and today.

There are plenty of obstacles, inertia, normalcy, it’s too complex, I’m too busy, it’s only for the struggling, or I’m not rich enough, but the reality is that every one of us is in dire need to address in the present moment things that are going to affect us in the long term. It’s still true that “the things we do today determine who, where and what we are going to be tomorrow.”

Exactly what we should be doing is taking serious steps to manage our retirement planning issues. This may require delegation to trusted tax and planning advisors who acutely specialize in the field of retirement planning to address some of the following potential pitfalls and prosperity zones in the landscape of retirement planning.

Too Many Eggs in One Basket — Failure to Diversify

When we are so focused on what we do with real estate it’s easy to just consolidate all our efforts, activities and retirement planning investment activities into real estate too. After all, we have our hands on the pulse every day, right? And it is true, that more individual fortunes are made in real estate, yet more bankruptcies and losses are as well. How many times have we witnessed, know of people, or have been a part one of those seemingly inevitable, predictable cycles, downturns, that turns egg custard into rotten eggs just long enough to wipe out the otherwise fortune that had been amassed, whether it’s in real estate or the stock market?

Academia has proven that risk of market loss is reduced significantly by holding more than just one asset class. Just by splitting a retirement nest-egg away from being 100% in the stock market or real estate, to 50-50 each, the risk is cut almost in half. This risk reduction continues when you add a 3rd, 4th, and 5th diversification component (asset classes) all the way up to 8. After that, statistically, there is very little risk reduction achieved. So don’t put all your eggs in one basket if you want to weather the storms and survive to navigate the changing, twisting roads towards retirement heaven.

Inadequate Retirement Plan Type – Deductions and Contributions Equal Golden Eggs

Self-employment can be a wonderful thing: greater autonomy, tax deductible expenses, and of course, the only person limiting how much you make, is you. For various reasons, realtors have often not capitalized on getting the right kind of retirement plan types in place, year after year after year. Missed opportunities indeed! The great principle is that income taxes due are offset by retirement plan contributions. Does anyone want to pay more in income taxes than they have to? Why of course not. To get deductions against your annual income tax due it’s a very simple reality that it takes contributions to get deductions. Contributions to your retirement plan. The more the better.

Here is a quick summary of what’s available to self-employed real estate professionals, and how much you can contribute/deduct annually. The sooner you get a handle on it and implement the program best suited for you, the better:

  • IRA – traditional $5,500 per year plus 1k catch up at age 50 (phase out deduction 62k/99K)
  • SIMPLE IRA – $12,500 per year plus $3,000 catch up at age 50
  • SEP IRA –20% of Schedule C profits up to $54,000
  • 401k/Profit sharing combo – Solo 401k. “Employee portion” of up to $18,000 (plus 6k at age 50) by 12-31 of the calendar year and then by your filing deadline next year is the “company portion,” 20% of the net (after deducting any of the up to 18k) of schedule C.
  • Defined Benefit Pension Plan – If you’re a high earner, like $200k or more annual net, you can get the highest contribution/deductions by using this plan probably in tandem with a 401k/profit sharing plan. The aim is to fund up to $215k per year lifetime income. Over $200k per year contribution/deductions can be achieved depending on the age and income and variables. This category relies upon your financial professional, plan actuary and accountant to streamline your plan regularly to optimize the results for you depending on your income and cash flow needs.

The Cost of Waiting

Above all, good ideas are less than worthless unless you take personal intent filled action to implement them. Studies repeatedly validate that every year you wait to start collecting on your own retirement planning deductions/contributions that the losses in future value are both irreplaceable and shockingly significant! Is your income cyclical? Of course to some degree, but that very fact underscores and heightens the importance of carpe diem! Opportunities lost cannot be regained, and paying yourself first is the first and greatest law of retirement planning. The retirement planning window of time is like a portal when you are making it as a realtor and when it closes, and it eventually does for everyone, you don’t get any do-overs.

At the end of the day, and this article, now is the time for all good self healers, self actualizers, and self starters to review your retirement plans with your most trusted advisor, hopefully one who actually is immersed in the day to day nuts and bolts of helping people just like you with addressing and implementing the things you need to help assure you’re being the kind of good steward of your own affairs just as you advocate others do when dealing with you on real estate. If you are looking for someone who had done this, for maybe 30 or 40 years, or if you want a second set of eyes for a second opinion on your current retirement planning x-ray, then feel free to contact the author or for any questions without any cost or obligation. Until then, happy listings and selling, and may you discover that your future is rainbow bright!


William O. Wright is a Certified Financial Planner is President of President of Guidance Financial and Life Planning Services, Inc.

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He is also a Registered Principal and Investment Advisory Representative offering Securities and advisory services offered through Infinity Financial Services.

Infinity Financial Services, Guidance Financial and its affiliates do not provide tax, legal or accounting advice. This material been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction

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About the Author

William Wright, CFP

William Wright, CFP is a Certified Financial Planner with Hawai'i Life. BIOGRAPHY OF WILLIAM O. WRIGHT, CFP® William O. Wright is the President and founder of 33 year old Guidance Financial Consultants, Inc., a former Kansas Based Registered Investment Advisor. He attended Wichita State University from 1970 to 1973 with a major in business. After helping introduce, recruit for, train brokers and thereby establish three of Wall Street’s largest investment firms in the Wichita area, serving a tenure as a Vice President for Shearson Loeb Rhodes, he incorporated GFC in 1982. There he has managed or directly overseen over $50,000,000 in client investment portfolios. He and his firm added to the financial planning software programs for Money Tree Software in the 1980s. He and his firm have repeatedly provided numerous content rich, multi-sessioned comprehensive personal financial planning training programs for the members of the Boeing Management Club, Wichita Engineering Association, IBM Management Club, KU School of Medicine at Wichita, The Kansas Corporation Commission and USD 259 since 1984. He was one of the first financial professionals in Kansas to achieve the CERTIFIED FINANCIAL PLANNER™ certification in 1980, as granted from the College For Financial Planning of Denver, and has since continuously been a member in good standing with the Financial Planning Association. He has also annually presided, chaired or held various board positions with the Kansas Financial Planning Association and served as it's President Elect for 2008 and Chair for 2009. He served as the President of the Wichita, Kansas Chapter of the Society Of Financial Awareness, a 501c3, a nationwide tax exempt public service organization. Accordingly his direct experience with hundreds of case studies, years of experience as a board member of three different publicly traded companies, cumulative experience and commitment to continuing education make him an oft used speaker and interview candidate for various financial and life planning topics. He has been published or quoted in many different area and occasionally national print media publications. He has produced several educational and public service financial television programs which have been repeatedly aired on area cable, television and network TV. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. You can email me at bwright@8financial.com or via phone at (888) 250-4012.

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Liam Ball

December 14, 2017

Thanks William. A good reminder to get a little squirrelly.

William O. Wright, CFP

December 15, 2017

Greetings Liam,

You’re Welcome.

And remember don’t wait till the last minute or MISS your YEAR END DEADLINES.
I can get something set up for you right over the phone in about an hour so just call me. Everything can be done electronically so it’s very easy…you just have to call me. 808-633-8088. Aloha and Merry Christmas ….Bill

Bennett

December 17, 2017

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