Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Digital financial planning and guidance at scale
June 20, 2020
There are a number of things people buy that they consider investments. However, some are difficult to sell. Others are so dependent on market conditions that when you want or need to liquidate, it’s hard to consider them investments. And some are bookkeeping headaches.
For many, using your savings for support – while you delay collecting Social Security a few years – may be a much better use of savings.
While some types of real estate are poor retirement investments, they are not quite as bad as lottery tickets.
Raw land is particularly bad. My first lesson was buying raw land with a partner who was a local commercial real estate agent. It was next to a mall, and we had hopes of getting it rezoned. After many years of spending lots of money for architectural and engineering support, we still couldn’t get the town council to approve of the rezoning.
You have to be extraordinarily patient or lucky to make good money on raw land; a simple mix of stocks and bonds would have done much better over the same time period.
My next lesson was getting into partnerships for commercial and rental properties: Most of them were complete flops. Unless you are the general partner, you have no control over when the property will be sold (and it’s very difficult to find someone to buy your share). I still have one real estate partnership left (which I bought into about 30 years ago). My attempts to get the general partner to sell have been fruitless. It makes a reasonable return, but we’re trying to leave a liquid estate to our heirs and reduce the work that will be required by the executor of our will.
We did buy a vacation condo. Our early experience with renting during the time we were not using it turned out bad – because of low occupancy, damages by renters, and too much bookkeeping. So we stopped renting it out and now consider it a lifestyle cost, not an investment. The same is true of timeshares; they are notorious for almost assured losses. You also need to plan your vacations for a very long time in advance. If you are enticed with the prospect of owning a vacation timeshare, carefully consider the price you will get when the time comes that you want to escape the homeowners’ fees and property taxes.
We do like real estate investment trusts (REITs) when in a low-cost index fund. Such funds are easily sold and offer good returns. That said, the principal could fall appreciably in another real estate market crash.
So, after all of these years, I’ve come to believe that the best investments are easily-marketable index funds based on stocks and REITs, bonds, and delaying collecting Social Security benefits.
The latter brings a large increase in primary and spousal benefits, particularly at the time of death of the primary earner. The odds of Social Security trust failure, and subsequent reduced payments, are very low for middle and lower-income people.
Higher-income people may experience higher income taxes on Social Security, larger Medicare premiums – and in a number of years, perhaps a reduction in the basic benefit. It’s likely that delaying Social Security will still be the best investment, particularly for those with a younger spouse with low wage records.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2022 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.