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Millennials learning from their Boomer-parents’ mistakes

As Boomers lost their pants with IRAs and 401Ks, Millennials are increasingly seeking out real estate investments and planning out their retirement, taking into account the losses of the previous generation.

A sizable Millennial clientele

Though the percentage of my clientele who’re 35 years old or younger is less than half, it is significantly sizable, and happily so. Roughly 20%. In any given year, I now have more clients in that age group than in any 10 year period between the time I opened my real estate investment firm, January of 1977, and 2006. This is an excellent trend, if six years can be counted as a trend — and for just one firm.

I bring this up in order to sound the alarm to the children of Boomers. As a Boomer, I view this development as possible evidence of Millennials and their big brothers ‘n sisters eschewing the advice of their elders. This is a good thing.

Millennials learning from others’ mistakes

I view that as a silly question. Boomers as a generation, are retiring ugly, or at best, boring, generally speaking. Millennials and their older sibs are simply using their heads, nothin’ more and nothin’ less. Would you take shooting lessons from a guy with three missing toes? Nor would I — and I wouldn’t take retirement advice from a 69 year old barely makin’ it, whether it was a parent or not.

Based upon first hand experience, I’ve come to admire Millennials. So many of ’em seem to be from Missouri — in other words, ‘show me’. They don’t necessarily buy the story sold them about 401Ks and IRAs being the likeliest road to a solid retirement. After all, it worked so well for their parents — NOT.

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I applaud them. The fact so many of ’em are landing on real estate as a vehicle to retirement, shows freshly gained wisdom — and a lotta reading. History shows us that in good times and bad, in recession and in boom times, even, maybe especially in times of economic inflation, real estate not only holds its own, it triumphs. And no, citing your Uncle Fred’s disastrous experience with real estate doesn’t change any of it. People have lost fortunes investing in gold, yet it remains on the ‘A’ list of wise, long term investors.

Staying away from 401Ks and IRAs

So, in case I’m not being clear, the point is to STAY AWAY FROM 401Ks AND IRAS.

They will suck you dry for no readily apparent reason. Sometime around your 45th to 50th birthday it will hit you like a red hot anvil, falling from the sky. ‘Holy crap, I’ve screwed the pooch’. This nasty little thought bubble happens when a 40 to 50-something realizes they have $132,000 in their so-called ‘retirement plan’ at work. This is followed by the horrifying epiphany that there’s no way in hell they’re gonna build that paltry figure into even a laughably viable figure, allowing them to retire to a life of bitter resentment, and endless ‘StayCations’.

Here’s my advice: Get out of your 401K/IRA — period, end of sentence, no exceptions. 

If ya can’t get out, at least stop throwin’ good money after bad, and stop contributing. And no, your next objection about forgoing the ‘hugely beneficial’ employer match, is better left unsaid, to avoid embarrassment. Remember, the vast majority of your parents had employer matches too. Let’s review, OK? How’s that been workin’ out for THEM lately?

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Invest in real estate.

Get outa your 401k/IRA if allowed. Pay the taxes and penalty. You’ll be lucky to end up with 50-60% of the original balance. That’s the bad news. The good news? If a solid real estate investment program, beginning with half your current capital balance can’t slaughter the ultimate long term results of your crummy employer retirement plan, then somebody’s not payin’ attention.

Let’s conclude with some real numbers, shall we?

If your parents had invested when they were your age, say back in 1975, they’d of enjoyed two impressive upturns, and one historically colossal upturn in real estate values. Same with rents. If their luck was less than cool, and they retired a couple days before the aforementioned historical bubble burst, where would they have been then, and where would they be now?

So happy you asked, as I lived through those times and know how the final chapter works out. They lost big time — give or take about a third of the value of their real estate investment portfolio, almost faster than they could watch it happen. Yet, having spent just over 30 years investing and/or exchanging when times were good, and waiting when times were bad, they easily built that portfolio into $2.5-3 Million. They paid off their home too. They’re debt free. Imagine that. They never bought into the myth of the employer match or any other such Barnum and Bailey hokum.

From the day they retired their monthly income has never fallen below five figures monthly. Most likely $12-15,000. Know what you’ll never hear them paid to say?

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Hi — Welcome to WalMart! I rest my case.

Written By

Jeff Brown specializes in real estate investment for retirement, has practiced real estate for over 40 years and is a veteran of over 200 tax deferred exchanges, many multi-state. Brown is a second generation broker and works daily with the third generation. With CCIM training and decades of hands on experience, Brown's expertise is highly sought after, some of which he shares on his real estate investing blog.

2 Comments

2 Comments

  1. Ben Fisher

    April 9, 2012 at 11:41 am

    Great article Jeff. It is true, we have learned from our parents in many cases to change the way we think about investing. Perhaps this information is more readily available than it has been in the past? I make it a habit of “asking the right questions” to as many successful people as I can as there is a lot to be learned.

  2. Jeff Brown

    April 9, 2012 at 1:50 pm

    Thanks Ben — Though it is more available, the ability, or lack thereof for Boomers to learn from their parents’ insufficient retirements is scary, considering what that generation has positively brought to the nation’s table in general.

    Plus, when you’re 45 with a house/mortgage, and not much in your job’s retirement account, what else is needed to become seriously concerned, and search for a more effective formula?

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