Escaping the retirement trap
A young man starting a career would dismiss the idea of saving for retirement as ridiculous. Retirement seems a long way off. Unfortunately, this is one of the critical mistakes most people make. Saving for retirement should begin once the first paycheck is received. Even if your work environment offers a pension plan, you should be saving 10% of what you earn so that you can invest it and make it grow. To be comfortable in the golden years it is necessary to have saved 15 times your annual salary for retirement. Most people are not even close to that figure and have no luck reaching it. The key is to work on generating multiple streams of income. This article looks at the following sources of income to help escape the retirement trap:
- labor income
- stock investments
- residential real estate investment
- marketing online
This is one of the main sources of income for most people. They work 8 hours a day, 5 days a week and take home a salary. The idea of exchanging time for money is not a good one, since you have no income if you can no longer work. Consider if one of your limbs is damaged and this affects your ability to do your job. You could be fired or assigned to menial tasks, which would decrease your earning potential. It is very risky to rely solely on this for income generation.
The stock market can be an incredible source of growth for your money. Many people believe that investing in the stock market is too risky and that it is safer to give it to a financial adviser or leave it at the bank. The problem with this strategy is that the interest earned barely beats inflation and your money could lose value as the years go by. If a person invests time and effort in learning the skills of a good stock market mentor, then there is a great chance of success. The difference it can make to your retirement plans will be quite remarkable. To illustrate this, let’s use the following example of a fictional person named Jane:
Expected retirement age: Sixty-five
Current Fund Amount: $10,000
annual contribution: $5,000
If the annual return is 6%, then the fund balance is $634,000 after 30 years
If the annual return is 15%, then the balance is: $5,737,600 after 30 years.
If the above was your retirement savings at age 65, you can clearly see that it makes a big difference if you earn at 15% compounded per year. Investing in the stock market may be one of the best ways to secure 15% growth.
Investments in residential properties
These investments are powerful due to leverage. Leverage is the ability to make a large investment with a small amount of money. In real estate, people can buy a property on a regular basis with a 10% down payment and a 90% loan. Let’s look at a specific example:
You buy a house for $100,000, pay down $10,000, and take out a loan for $90,000. You now control an asset of $100,000 but have invested only $10,000.
You rent the house and this covers the mortgage payments and expenses.
The house appreciates in value by 5% per year in two years and is now worth more than $110,000. The value of the mortgage paid is between $1,000 and $2,000.
You sell the property for $110,000 and then you would receive between $21,000 and $22,000 instead of the $10,000 you originally invested.
A better way is not to sell the house, but to take the $10,000 equity you earned on the first house and use it to buy a second one, so you now have two assets going up in value and two tenants paying mortgages. If you repeat this process, by the time you reach retirement you will have accumulated valuable assets as well as an income stream from your rental property.
This industry is worth approximately $176 billion a year and generates more revenue than the movie, music, and gaming industries combined. The idea is for independent representatives to market and sell quality products to their network. Residual income can also be earned from sales made by the people on your team. The idea of earning income from the efforts of others is powerful and can lead to a very secure financial future as you will always have income even if you are physically unable to work. Network marketing companies also provide top-notch training programs in personal development and sales techniques that can transform anyone into a champion. Sales is one of the highest paying professions in the world and a person skilled in it has tremendous earning potential. The key to success is to believe in your product and also be fearless in approaching people. Once you have these two ingredients, you will be unstoppable. Most companies pay a commission on each product sold with bonuses for reaching a sales target in a designated period of time. Once you reach a certain sales target, a residual income can be achieved. Some network marketing companies will even take their top earners on fully paid vacations to reward their efforts.
The retirement strategy of relying on earned income and a pension fund to provide a comfortable retirement is high risk. Trading time for money will never make you rich as you have a limit to how much income you can earn. It is important that you do what it takes to gain the skills necessary to generate multiple streams of income. In this article we discuss 3 alternative streams but there are many more. You can only escape the retirement trap by having more than one stream of income and finding the courage to relentlessly pursue the dream of a comfortable retirement.