rental property. Latimer noticed that Turner purchased the property in Pennsylvania as an investment but didn’t have a clear sense of its role or purpose within her larger retirement plan. For instance, he estimates that by the time Turner is 65, the value of the home could more than double. At the very least, by that time she could have significant equity that could play a major role in her retirement plan.
Latimer says he advised Turner to use the income generated from the property, as well as the capital appreciation, as her primary retirement plan. Utilizing Latimer’s advice, Turner re-evaluated and adjusted her portfolio to accommodate her new life as an independent contractor. She began a retirement plan, making systematic contributions to a Simplified Employee Plan (SEP) IRA, depositing part of the proceeds from the rental property into the SEP plan each month. Two of the funds that Turner holds are American Funds Growth Fund of America (AGTHX) and Davis New York Venture (NYVTX)–both highly rated by Morningstar.
Finally, Turner says she expects her income to slightly increase from her past salary, at least in part, because PMT Associates recently landed a long-term contract with a major financial institution. In addition, Turner’s personal training business continues to grow with a regular list of more than a dozen clients. And she continues to look ahead: Turner says one amenity of her new home is a fitness studio. “Clients will be able to come to my home-based studio for individualized fitness training,” she says. “My business will grow and so will my retirement accounts.”
Turner’s Advice:
Save the rent. If you own rental property, channel all or most of the income generated from the rental property into a retirement vehicle–SEP-IRA or individual 401(k). After you pay the mortgage and ongoing maintenance expenses, investing the funds in the market will help you maximize the value of the property investment. In the end, the capital gains you capture from selling the property may not be as large as anticipated, so benefiting from the compounding of rental income can offset that risk.
Get help. Educate yourself on all aspects of investing and retirement planning, and consult with a reputable financial adviser when necessary. There are several retirement planning calculators available on the Web that can get you started, including one from AARP (www.aarp.org). What’s more, two useful Websites to help identify an adviser include the Financial Planning Association (www.fpanet.org) and the National Association of Personal Financial Advisors (www.napfa.org).
Establish a clear and succinct plan. Envision where you want to be financially when you retire. Right now, Turner works for PMT Associates on-site at client offices four days a week and telecommutes one day a week. She sees her fitness clients during the evening and on weekends. “PMT Associates pays the bills and is funding my dream retirement goal of running TurneRound Fitness full time when I retire.” Whether or not you’re an entrepreneur, part of your retirement planning must factor in the type of lifestyle that you’d like to