The Broken 401k & Finding a Real Retirement Strategy

401(k) plans aren’t working for Americans. What’s wrong? What is a truly viable retirement plan for individuals?

New data suggests that the 401k retirement plan just isn’t working. It is even worse for those without an organized retirement plan of their own. So what has gone wrong? Just how bad is the situation? What might the best retirement strategy be now?

The Data Is In

The figures from Business Insider, the Economic Policy Institute, Federal Reserve Survey of Consumer Finances, US Census, and The Fiscal Times reveal a fractured system, with great disparity between how individuals are doing at preparing for retirement.

Key Facts from the Business Insider Report:

  • Average families with a 401k or IRA had $95,776 in their accounts
  • The average 401k and IRA balance has risen by around $4,500 since 2001
  • Unfortunately of Americans as a whole almost 50% have zero saved
  • The median family has $5,000 saved
  • The average for those approaching retirement between the ages of 56 and 61 have an average retirement account savings balance of $17,000
  • The top 10% of savers have at least $274,000
  • 82% of Americans without high school diplomas do not have a retirement account

The Big Switch

Business Insider notes that the “switch to 401(k) plans began at the same time that Social Security benefit cuts kicked in,” adding that “401ks are much more lucrative for Wall Street fund managers than pensions.”

It is also important to remember that Social Security was never meant to provide pensions in the way many need them today. They were designed as short term supplemental assistance for a limited amount of time. Now more than 50% to 90% of Americans’ only hope for income in retirement appears to be Social Security. And given the instability and shortfalls of the system it is just hope.

The most significant factor in all of this is the shift from defined benefit plans to defined contribution plans. That really applies to traditional 401ks and Social Security. With defined contribution individuals have to put money in, but really have no guarantee of a set amount of money coming out. Yet, reliable income remains the most pressing need for those approaching retirement. The size of a nest egg or balance sheet is virtually irrelevant, when what you need is spendable cash every month.

Traditional 401ks and social security can’t really guarantee defined benefits. That is their biggest flaw, in addition to the fact that people aren’t putting aside enough savings. The solution then is for individuals and families to both find a way to invest more, and increase the predictability and reliability of income thrown off by their investments.

Finding a Real Retirement Strategy

How should individuals be planning and preparing for retirement?

Look for:

  • Solid assets with low volatility
  • Inflation proof assets
  • Sound diversification for safety
  • Tax protected investments

Some of the tools for accomplishing these things may include; paying off your own home so that it can be leveraged with a reverse mortgage in retirement, as well as rolling over to, or establishing a self-directed 401k or IRA. These accounts can be used to invest in a wide variety of assets, including income producing mobile home parks.

The Role of Mobile Home Parks in Your Retirement Portfolio

Mobile home parks are one of several types of income producing real estate assets which can be powerful retirement tools.

The advantages:

  • Monthly and weekly passive income
  • Tax benefits
  • Ability to invest in them via self-directed retirement accounts
  • Move with inflation
  • Easy to diversify
  • Ability to build wealth and cash flow simultaneously
  • Low volatility
  • Growing demand with limited supply
  • Ease to understand
  • Personal control over asset value and performance

For many a couple of mobile home park investments may be all they need to secure their own retirement and financial future. They may provide free housing, monthly spendable cash, and build equity which can be passed on to future generations and other heirs. Even a modest park with 20 units, throwing off a meager $100 in positive cash flow per unit, each month is $24,000 in passive income per year. That far eclipses Social Security benefits. Multiply those results and a $100k a year passive income level isn’t too hard to achieve in this sector.

Summary

The data shows that the vast majority of Americans are desperately underprepared for retirement. The financial system seems to continue to trend away from providing a meaningful and reliable solution. Those that want to be confident in their future finances and income can take things into their own hands. A part of that plan could be mobile home park investments for cash flow and long term wealth building.

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