Epic Real Estate Investing - Can I Catch Up On Retirement At 50? - MY REACTION To Dave Ramsey & Chris Hogan | 1088

Episode Date: September 23, 2020

If you’d like to retire early and make up for some lost time, you don’t want to miss this episode! Today, Mr. Matt Theirualt gives his feedback to Dave Ramsey & Chris Hogan’s video “Can I Catch Up On Retirement at 50?” More specifically, Matt explains why Dave’s baby steps to reaching wealth by eliminating debt is a false strategy, and what you should do instead! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

Would you like to retire early? Do you need to make up for some lost time? Well, then this will be the best thing you've watched this year, maybe ever. At least that's what one of my private REI-A's clients wanted me to say to you, after she forwarded me this Dave Ramsey video. Can I catch up on retirement at 50? And she said, watch, and please record yourself while you do. I want to see the look on your face and hear your reaction.

So, I agreed. And here we are. But before we begin, click the subscribe. button because I post cool stuff like this each and every week and you don't want to miss it. This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit.

Matt Terrio has been helping real estate investors do just that. more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit rei-aise.com. Here's Matt. Hi, my name is Matt Terrio, CEO of Epic Real Estate, where I show people how to invest in real estate with an emphasis on retiring early. And one of my clients sent this Dave Ramsey video to me to watch titled, Can I Catch Up on Retirement at 50? She visit Dave Ramsey.com to ask, what are the steps to catching up on saving for retirement at 50 years of age? I feel the window to save is closing, but also trying to remain hopeful and focus help. Well, here's the reality.

You know, Angie, you've got to be aware of your dream and know what it is you're chasing and why it matters to you, and it is never too late. If you wake up with air in your lungs, you've got an opportunity, but you have to have a plan, you've got to get on a budget, you've got to get allergic to debt and now, right now. Sell some stuff. Look at taking on a second job if you have to, but you have to delete the unnecessary in your life so you can grab what's valuable, and you may have to look at downgrading lifestyle.

And you do those things that I'm going to tell you, you're going to grab back control. Get over to Ramsey Plus, get plugged into a community so you're not doing it alone, but you feel connected. And that's how you do it, Dave. Yeah, that's exactly right. The window is closing. Yeah. Mathematically. And yet

the shortest distance between where you and wealth is still the baby steps. It's still get your emergency fund in place and get rid of your debts, which gives you the cash flow to pour into your retirement and increasing that and getting it up to 15%. If you save 15% of your income from age 50 to age 65 and you have an average income, you'll be able to retire. And I suspect you might make more than that

and you might work longer than that. through that period of time. It wouldn't be unusual for someone in their 50s. Average income entails also taking into account what people that are 22 years old make. Right. And so typically a 50-year-old has had an opportunity to grow their career. And I don't know what you do, Angie, but I'm just going to make a reasonable statistical assumption that you have an above-average income. Well, it's possible.

I mean, that's the thing that I want people to hear out there, Dave, because I still get this question a lot. Is it too late? Can I still do it? Well, I know you can. The bigger question is, will you? Yeah, I mean, you got to treat it like the house is burning down. Yeah, you, I mean, it's urgent. Yeah, you really do. And I say, do you panic and skip steps.

No, no, no, not at all. No, you just have an extra urgency to work the steps because the quicker you get out of debt, the quicker you have your income and your control to build a wealth with. And so just turn up the heat on that, baby. Right. And be allergic to excuses. Now, Dave, I had a coach.

He was about 150 years old. That's not true because that, making biblical, but he was old and crotchety. He probably wasn't biblical at all. No, he was not at times. But he told us something that as players out there, he said, don't make excuses, make place. And I say that in this, because even in the period of COVID-19 right now, people can use

that as an excuse not to stay focused on the plan. And it's really important not to do that for yourself, because that's how you end up losing a year or two or three, because we're going to say, I'm going to wait a until this or I'm going to wait until that. No, no, no. Be urgent right where you are right now and don't make excuses for stupid. So I understand why my client sent this to me as the plan prescribed by Chris Hogan and Dave Ramsey was to basically set a budget, eliminate debt and save money, which my client

knows that this is probably the slowest, most painful way to tackle this caller's issue. And I'll let you in on a much faster way and in a much more for sure way too. But what initially stood out to me here was Dave's use of the word wealth. You know, wealth defined as an abundance of valuable possessions or money. And the word abundance defined is a very large quantity of something. And a plan of setting a budget, eliminating debt, and saving money isn't going to get anyone to a very large quantity of valuable possessions or money. Unless they make a lot of money in the first place.

Because the mathematical fact is that most people don't make enough to save enough for this plan to work to create wealth. Now, I'll let you in on what can, however. But if you love what you do for a living and you're content with the middle class life, follow Dave's plan. You know, I've never met him. Seems like a good guy. He seems like he's got great intentions. And I'd never advise anyone against doing what makes them truly happy. So, if you are happy with what you do and where you're headed financially, then don't listen to me.

But if you want to be wealthy, let alone want to catch up for a lost time like the caller Angie wants to do, it ain't going to happen with the Ramsey plan. Now, granted, Chris and Dave were a little handicapped in the sense they don't know much about Angie. So their advice, it's limited to, you know, cliches and platitudes. But let's work with the advice she was given and see what that would produce. Now, Dave said Angie's window is closing mathematically, which is absolutely true, with their plan. And then Dave said the shortest path to where you are and wealth is through his baby steps. Now, I wasn't familiar, so I looked them up. I'm open. I mean, maybe there's a shortcut in there that I don't know about.

I certainly don't know everything. So with a quick Google search, here's what I found. Baby step one, $1,000 to start an emergency fund. Now, it's prudent to have some emergency cash on hand, but it's not a path to wealth. Baby step two, pay off all debt using the debt snowball. Now, I don't like this advice, particularly the use of all debt, as better advice would really depend on the type of and the amount of debt Angie has. Hogan and Ramsey, they think all debt is bad, though. I mean, most people think having no debt is a prerequisite to creating wealth. Well, it's not.

There's probably more truth to the contrary, actually. And I'll explain in a minute. Baby step three, three to six months of expenses in savings. This doesn't bother me, but it's not a path to creating wealth either. And I'm not sure why it's separate from step one. Baby step four, invest 15% of household income into Roth IRAs and pre-tax retirement. Now, that doesn't sound all that bad on the surface, but it's not going to create wealth. It's not doing it for the majority of people that follow this advice.

I mean, don't get mad. It's just math, and I'll show you. You know, most people, they just don't make enough to save enough for this to work. And if it does, they're way too old to enjoy it. Baby step five, college funding for children. Now, I actually don't like this one at all. But it also depends on what your children will want to do for their profession. So, I'm just going to leave that one alone.

Baby step six, pay off home early. Well, this is potentially the worst advice of all of these, particularly when it precedes step seven. You see, when you pay off your home early, you are essentially retiring, your money before you retire yourself. Now, there's nothing wrong with owning your home free and clear, but it will slow your wealth creation by making it a priority. Baby Step 7, build wealth and give. Can't argue with that.

But why is it the last step? And after reviewing this list in its entirety, it's no wonder Dave calls it baby steps, because it's made for babies. I mean, maybe he lacks confidence in his audience's ability to pull off anything else. Because this is a game plan, built around a life of fear and sacrifice,

working hard for a really long time, because that's how long it will take for this plan to pan out. This is one giant game of defense, and defense alone does not create wealth. To get wealthy, you've got to score points. You've got to incorporate some offense, a lot of it, and you don't want to wait,

as David advises that you do, to wait until the end of the game to actually start scoring. So Chris, he started in the right direction with his advice of taking on a second job. Because to build wealth, whether you have a lifetime to do it or just 15 more years like Angie, the focus must be on making a buck

rather than saving a nickel. But the plan really stalled when Chris said, get allergic to debt, delete the unnecessary, and take a look at downgrading your lifestyle. I mean, who wants to do that? And even if you did all of that, these conservative defensive moves

will barely move the needle. So then Dave chimed in suggesting that she invest 15% of her income between the age of 50 and 65 and then she'd be able to retire. Well, I'll give Dave the benefit of the doubt and we'll just do the math on what this would produce for Angie. Now, like they acknowledged, we don't know much about Angie. So we're going to have to make some assumptions. So we'll start here. The U.S. median household income in 2019 was $63,030. And Dave mentioned how that number is brought down because you're averaging in the income of people in their 20s.

and that her income, being 50 years old, would likely be more. So let's assume it's $75,000 a year. And we'll even assume that she has no debt to just paint a best case scenario. Now, if she were to save 15% of her income, as Dave suggested, that's $11,250 a year, or $937.50 per month until she's 65, of which would amount to $168,750. Now, if she had it invested in a better than average fund over a 15-year period, it seems it would be reasonable to expect an 8% return without any extraordinary risk. I mean, given her stage in life, you don't want to push it.

So with this, she could expect a balance of $324,410 by the age of 65. Now, it seems respectable, not wealthy, but respectable. But the real question is, how long would her money last? So most financial planners will recommend reducing risk the older you get and predict a 4 to 6% return at the time you start making your retirement withdrawals. So I'll use 6% will be really optimistic in Angie's scenario, starting with our balance of $324,410, earning a 6% pre-tax return. And we'll assume she'll withdraw $5,000 a month and will increase her withdrawal by 2% each year to compensate for cost of living expenses. Then we'll also assume that she moved to a 0% state income tax state. I just did that last year.

And so we'll place her in a federal marginal tax bracket of 25%. With those assumptions, Angie's money is projected to last approximately six years. Angie will be just fine as long as she doesn't live a day past the age of 71. Now, that sounds morbid. I know. But I bring that up specifically because this antiquated. plan of setting a budget, eliminating debt, and saving money to retire, became the norm when the average life expectancy was much younger. You know, just 50 years ago, life expectancy was 10 years

less than it is right now. Meaning, on average, you have to plan today for an additional 10 years of financial support than just your grandparents did. Now, Angie did end up with $324,000 with this plan. Hardly wealthy, but it's something. But the average 65-year-old with this plan, however, ends up with a lot less. $212,600 to be exact. The median balance of a 65-year-old's retirement account is just $67,600. The point being, this plan doesn't work for most people. Those are the numbers, regardless of your feelings about them.

Now, if you'd like a faster alternative, not to mention any more for sure, one let me know by smashing the like button and let's look at the big picture from a very different angle if Dave Ramsey's end goal for retirement as it is with all traditional financial planners is for you to save enough money to where you can live off the income the interest of your savings produces consider forgetting the saving altogether and focus on creating the income first and then let your income build your savings just flip the priority both take some work and discipline but the

alternative income focus plan is considerably faster. Here, I'll show you. Chris Hogan's initial suggestions were to be aware of your dream, be aware of what it is you're chasing, know why, and take on a second job. And I really liked his recommendation to get plugged into a community of like-minded people so you're not going at this alone. I agree. Start with all of that.

But when he said get allergic to debt, he lost me. And here's why. It's going to be tough for Angie. or anyone for that matter, to catch up without using debt. Good debt, that is. To Chris and Dave, there's no such thing as good debt. It's all bad to them. But when I say good debt,

what I'm talking about is the type of debt that pays you more than it costs you. You know, whether you want to retire early or make up for a lost time like Angie, nothing will help the average person do that faster than by leveraging other people's money. Now, before you shrug this off, Let's look at something very simple that anyone can do. Dan A from Chicago, a private REIA's client of mine. We've been working together for just under a year. And inside of the Facebook group for my private clients,

we post our wins for the week every single Friday. And Dan, very recently, posted this. Three deals scheduled closing in the next two weeks. The first two were nurtured over five months with the relationship with the seller. First one is closing Tuesday on a portfolio of nine properties for $375,000. The seller is financing it

with a $180,000 down payment, of which he borrowed in private money. So he's 100% financed on this deal, 100% debt. And the total monthly rent for this is $11,500, putting his cash-on-cash return in the first year at 26%. The second one,

he signed an option to buy 13 more properties for $650,000, of which he'll borrow the money to buy those two, of which will total a monthly rent of $15,790. And on the third one, he signed a contract for two subject to properties

that will need some slight rehab work. So his exit strategy here is to sell them with a wrap-around mortgage to a family unable to get a loan. And the spread there is expected from $250 to $450 on the wrap. I'm not sure if that's per property or not. But it doesn't really matter.

The point being here, in less than a year, armed with the right information and backed by massive action, Dan created $27,000 plus dollars per month in monthly residual income one year. His quick results are not typical, but they're not uncommon either. Bottom line, you don't need to start with a 401k and wait 40 years to retire. You need to start with some income properties and wait maybe 10 years for your properties to retire you. In Dan's case, he only needed one year using sound real estate advice to create five times the income

that Angie is going to make using antiquated traditional advice over a 15-year period. Now, this isn't get-rich-quick. It's just get-rich-quick-er and permanently, as Angie's money will run out in six years as we showed. But Dan's won't. Both will take some discipline, both will take some hard work. But the question that you want to ask yourself is, how long do you want to work hard?

Now, I can hear the critics already. I have heard it all before. What about when the tenant trashes your property? What about the midnight call for the broken toilet? What about when the bubble pops? I've heard it all. I've been doing this for a while. And people love to focus on why investing in real estate like this won't work. But it's real estate like this that has worked for more people than anything else. So if you're concerned with catching up on your retirement plan or maybe you like the idea of retiring early, odds are the strategy of setting a budget, eliminating debt and saving money is not going to get you there on your timeline. If it gets you there at all,

don't get mad. It's just math. I'll see you next time. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.