Americans are facing an urgent, but often overlooked need for passive income. Some have put this thought off until retirement. The big problem is that most never know when, and how soon they are really going to need it.
The Desperate Need for Passive Income
Via the Harvard Business Review professor Robert C. Merton has echoed the warning of a pending global retirement crisis. Specifically Merton says that income is the biggest challenge facing Americans in retirement. A big nest egg might sound great, but it will rapidly disappear, unless it is throwing off cash flow returns. Unfortunately experts like Merton point out that the entire investment and retirement saving system completely fails to help individuals and families target income goals for later in life. They focus on the wrong goals; defined contributions, not defined benefits.
Retirement Saving Statistics
- Only the top 10% of Americans have $250,000 or more saved for retirement
- The average 401k balance is around $90,000
- Around half of Americans have no savings at all
Even for the wealthy with $1M saved, withdrawing $100k per year would completely deplete their funds within 10 years. Yet, more and more Americans need to be prepared for a 30 plus year retirement.
Kiplinger and Bankrate.com IRA Minimum Required Distribution calculators show that the average 70.5 year old, with a $90,000 balance may have to begin withdrawing just over $3,000 per month. That’s just $250 per month. Meanwhile the balance is decreasing.
You Never Know When You’ll Need It
Despite the fact that many Americans say they will just work until 70 or older in order to pay their way, the data shows most are retiring far earlier than planned. And they are not doing it because they believe they are financially prepared. This can be due to layoffs, health problems, or simply age. He Transamerica Center for Retirement Studies’ Survey of American Retirees says the median retirement age is actually 62. These factors that force individuals into early retirement can also bring big expenses themselves; depleting any savings a lot faster than expected. Some statistics show the average retirement account balance plunging around 50% within a few years of retirement age.
3 Current Challenges to Earning Passive Investment Income
- Rising living expenses which prevent savings
- A new era of zero or negative investment returns on stocks and bonds
- A recession forecast for 2016
Finding Income Solutions Pre-Retirement
The bottom line is that individuals need to setup and secure passive income streams in advance of retirement. Having a reliable stream of passive income coming in now means that you’ll be ready for retirement at any time. Every year that you don’t retire you can use that surplus income to expand investments and grow income streams, or spend it.
CDs and investing in mortgage debt are examples of income producing investments. Yet, one which may be far more advantageous in the years ahead is mobile home park investing. It doesn’t require great credit, substantial startup capital, or full time hands on management. Yet these investments can throw off cash every month, while providing extra tax breaks.
Take a look at this asset class and find out if it is a good match for you…