Is it Better to Retire with Savings or Income?

The Big Question Most Investors Never Answer.

Should I retire with savings or income? This is one of the most important fundamental questions every investor needs to answer for themselves. Yet most people never even consider the decision. Why? As I've written before, retirement planning is broken. Almost every discussion around retirement focuses on "how much savings do you need to retire comfortably?" Trust me the answer is a big number. According to a recent study people who have at least $1 million to invest think they will need about $4 million to retire comfortably. For most of the people reading this, that number will be much, much higher – especially for those in California and New York given the high cost of living and high state taxes.

Yet even those fortunate enough to retire with a large sum of saving will likely have a problem. If you retire with savings (stocks and bonds*) then the moment you stop working you will be faced with an uncomfortable reality: the longer you live, the less you should be spending. Less on travel. Less on your daughter’s wedding. Less on a down payment for your son’s first home. Less on everything. It's what BlackRock chief executive Larry Fink calls "impossible math". That's not a peaceful retirement – and it doesn't have to be that way. Fortunately there is a better path.

If you retire with income producing assets (i.e. real estate investments) you will benefit from a steady stream of increasing income that will be there whether you live for another 20 years or another 60 years. This means you’ll actually be able to spend more over time — not less.

While the question of savings vs. income is rarely discussed, I’m not the only one that recognizes the problem. A recent Bloomberg piece, Wall Street Just Doesn’t Get Retirement put it this way, “The goal of your retirement plan should be to provide income when you are no longer working, not to accumulate wealth while you are.” Or as I like to say, you’ve achieved true financial security when your passive income exceeds your living expenses.

Lastly, there’s another reason why retiring with income is more desirable than retiring with savings. With real estate your principal will be appreciating over time — not shrinking like savings. So you will not only be securing your own financial well-being. At the same time you will be creating a legacy of wealth to pass on to your children or the charity of your choice.

The truth is that most people don’t know how to access well-vetted private real estate investments — or even where to start. And most financial advisors can’t – or won’t – assist you. (See below) The good news is that Essentia Capital Partners can help you get there.

David Scacco | Co-founder & Managing Partner | Essentia Capital Partners

This is not intended as a solicitation for funds or an investment offering. This is for information purposes only.