The tumbling stock market and rising costs of living may be testing the faith of Generation X and younger individuals in their golden years. However, if you play your cards right, retirement is a possibility. The game at hand is investing.
For one thing, maximize your IRAs and 401(k)s with stock and fund investments that match your time to retirement’s risk level. It’s long been accepted that equities reward those who buy wisely and persistently, as well as those who don’t try to time the market.
The sound judgment is correct: the S&P 500, which represents around 80% of the overall market value, has given a 9.4 percent yearly return between 1972 and 2021.
Even if that sounds like a lot, remember that today’s $500,000 portfolio may be worth much more than your entire retirement account. Even though you would get big returns in the stock market over time, you can replicate this accelerated-retirement performance simply by purchasing one of those large index funds and adding to it year after year.
You may also build long-term wealth while progressively approaching retirement by investing in real estate in all of its many forms. Indeed, there are several methods to get involved in real estate investment. Let’s take a look at a few examples.
1. Directly own real estate
Buying your own real estate, whether to run the rentals or have someone else handle it, or simply to hold for a short time and fix and flip, may still lead to prosperity, as it has for millennia.
However, this is the most difficult path since you’ll need cash up front, management abilities, and market knowledge. I know several people who have all of that or enough of each one to make a difference, and they have done well. It’s a lot of hard work, but it’s been worthwhile for them.
2. Real estate crowdfunding platforms
Investing in individual properties across different asset classes, especially retail, multifamily, and smaller logistics sites, as well as investing with very little money is possible through these operations.
Although there are variations to this type of investing, the most popular one is as follows: You sign up for a platform that pools your money with others for access to owning a portion of this real estate while it is being managed by the operators of the platform. They don’t have the type of transparency, history, or liquidity that publicly traded equities have, but you can certainly enhance your retirement fund by making good use of this still-emerging new alternative.
3. Real estate industry stocks
There are a variety of firms engaged in real estate services, such as commercial and residential brokerages and investment and property managers. Jones Lang LaSalle is one prominent example, as well as RE/MAX Holdings. Data firms like Black Knight and the major homebuilders D.R. Horton are also there.
4. Real estate investment trusts
REITs are my sweet spot in all of this, especially as I’ve gotten older. These are investment pools made up of income-producing properties that must distribute at least 90% of taxable profits as shareholder dividends under tax law. That means they’re giving you a steady stream of passive income — which, if the REIT is well-chosen, should continue or even increase while the stock market fluctuates — and that it’s a great deal more predictable than what you’ll get with some hedge funds or mutual funds.
There are approximately 225 publicly listed REITs, and they can be either extremely diversified or specialize in a single asset class. Residential, office, Industrial, healthcare, and retail are just a few examples.
You can quickly shift between industries because of their liquidity, such as out of the failing office space into the hot warehouse logistics sector. While most are currently performing poorly like the rest of the market, their histories indicate that they typically fare better than a lot of sectors during recessions and against inflation.