Retirement
“I want to retire in 5 years” said a man who told his retirement goal to my professor a few years ago. The man looked to be in his 60′s and my professor was around 50. I knew my professor since freshman year.
“Retire so soon? Do you have a plan?” asked my professor.
The man’s reply was “Why yes I have a 401K plan and have social security to fall back on. Now that the kids are done with college, I just have to worry about their weddings, ” he said with a chuckle.
“I think I can move into a smaller house too and cut down on my expenses after I retire,” he added.
At that time, all I cared about was graduating out of college as fast as I could and didn’t give much thought into what they were talking about. Still I listened in on the conversation, because my professor always seems to have the answer to everything. And in all honesty, he seemed to be always correct.
My professor’s friend said that he was already maxing out his 401K for 6 years now and would hopefully have a “nest egg” that would allow him to retire comfortably. My professor, true to his nature, tried to dig deeper by getting more information to accurately determine if his friend’s plan was sound and viable. After going on and on about, how hospital costs and Medicare is going up, how to find good retirement homes, options and the fun and freedom of retiring, my professor’s friend did not specify the exact amount he had in his 401K, retirement savings, and investment accounts. Nor did he answer the question of how “comfortable” in terms of monthly cash needed to live comfortable after retirement when the question was raised. When the friend asked my professor when he planned to retire, my professor bellowed in a heartily laughter and replied with “I can retire at anytime now but I choose to finish my research.”
“I don’t understand. You don’t make that much as a professor now do you? Did you hit the lottery? Investing in the Stock market? How much do you have in your 401K plan? You can’t take that money out until your 69, you know,” the friend said. My professor then went on to explain how he and his wife had purchased apartment houses and small single family homes during the summer breaks starting in his 30′s. They gave him enough money each month to cover all his expenses and more. His check from his teaching profession was just a nice bonus and more than enough to get his sons through college.
“O, apartments.” Was the initial response of his friend. “I rented out an apartment too. I can’t stand it “ you have to be real handy to fix all the things that can go wrong with an apartment to keep your tenants. What brought you into real estate?”
My professor paused for a while and responded: “Instinctively, or just common sense told me that in order to be rich, I needed to own land.”
“My wife wanted to buy a house shortly after we married but we decided to buy a small duplex instead and rented out half. You are right about bad tenants and the problems a landlord is forced to be accountable for as we learned through that first property. However we sought better deals, better tenants, and rental managers to do the jobs we hated to do. Now it practically runs itself and gives us enough cash every month to live to comfortably.”
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