Let’s discuss today retirement planning, or actually, I hate the word retirement. In this article, we discuss about freedom planning because I’m all about freedom in one’s life. That’s an old, industrial age term meaning that you work all your life, hard, hard, hard, on a factory line.
Or in the case of our profession in dentistry, it’s on the dental line. Now, again, I’m not putting down what we learn how to do and the great work that many of you do serving patients. No, don’t get me wrong. I’m just saying, when do you know that you’ve got enough to quote “retire,” or I would say, “have freedom?” Freedom means you don’t have to retire; freedom means you can continue to practice if you want to. But freedom means you get to do what you want to do, when you want to do it, with whom you want to do it. See that’s what I’m all about. The problem is too many people think in terms of saving money, saving money, accumulating money, taking so much every month out of your paycheck, out of your W-2, and dumping into savings, and then turning that over to a third-party financial advisor.
Fixed Assets vs. Capital Assets
Who then tells you what? Put it in a 401k or other tax-deferred environment so that you can have tax savings defer the tax down the road, and then you’ll pile up this particular amount of money over the years. Now, if you’re doing nothing else at all, that’s not a terrible plan. It does make you do something. But here’s the problem. Find me a financial advisor that can tell you how much you need to have when you pile up all the savings, the 401k’s, how much you really need to have.
The orchestrate cash flow is not about having a pile of money. Because if you’re going for a pile of money, and you never learned how to turn that money into producing cash flow, sustainable cash flow, lifetime, predictable, sustainable cash flow. Then you just got a pile of money that you’re going to eat into every month of the rest of your life when you’re no longer producing active income. And inflation, which we haven’t seen in 36 years. See here’s the other problem, we’ve got 36 years from the early 1980’s ’til just the last few years of declining interest rates and next to zero inflation
Where do you think we’re going now for the next 36 years? Oh, it’s not going to be the same, no. It can only go one way, that’s up. Increasing interest rates and increasing inflation. Your financial planner, unless they have been doing this since the 1980’s or before, haven’t ever seen the new market that’s going to happen. They haven’t seen it; they don’t know. They’re only predicting what they know historically. Throw it out the window. It’s not going to work, the stock market’s predicted to only return between two and four percent over the next ten years or more. Bonds today, 2.5%, they always say put your money in 401k’s and the stock market, pile up, accumulate the stockpile of investment capital, and then when you get to quote “retirement,” no more active income, go safe. Yeah, take your accumulation and pop it into bonds because bonds are reliable and stable. Yeah, 2.5%? Yeah, that’s not going to produce anything for you.
So that’s the problem. Most financial advisors, they can’t give you that number. Or if they want to provide you with a name, they’re going to push that number way up here, they’re going to add millions of dollars to what your number needs to be. Why? Because they don’t know. And the higher that number is, the further down the road you’ve pushed your freedom point, or retirement if you want to call it that. I say push your freedom point too far down the road. Here’s what I know to be true. When you hit your freedom point, and you’ve learned how to orchestrate sustainable, predictable cash flow out of your accumulated capital assets.
Then you’re going to grow those assets. You’re going to learn how to improve them. It grows faster when you can concentrate on continuing to grow those. Now, I don’t mean that as a job, you don’t have to work at it. It’s all about connections in an alternative investment environment. That being, what I love, is real estate. Now you’re gonna say, oh yeah, David, but that’s hard, but people lose money in real estate, blah blah blah. Yeah, absolutely, absolutely. Real estate markets also cycle as well. Yes, yes they do. What I love about real estate is it’s an inefficient market. That means the big boys, the big institutions can’t play there, they can’t manipulate those markets like they can the stock market. It’s available for small investors, individual investors like me, like you.
It’s all about connection to the right people. It’s an insider’s game, and most people don’t understand that. They try to either do it themselves, and get beat up because they don’t know how to manage tenants or contractors. They do it the wrong way. They think HGTV, “Flip This House” is something they can do on the weekends. No, don’t do it that way. It’s all about connections. When you build your freedom plan, your freedom date based on capital assets and not financial paper, capital assets that will keep up with inflation, then you know what your numbers because those capital assets will produce predictable, sustainable cash flow. See, as a passive investor, totally submissive, I can get 12% plus on my money. I know what my return is, whether it’s an up market or down market, I can do it in either one. If I want to go active and build my capital base faster, I can get well into the 30% returns. You can’t do that in the stock market. The stock market’s like going to Vegas.
You might as well be playing craps. It’s a casino, and people ride it up, and they watch it fall down, they ride it up, they watch it fall down. They lose decades of potential wealth-building by playing that game, and then when they get to the date or the time when they wish they could retire. When their back is hurting so bad, or their neck is killing them, and they go, “Martha, I don’t know if we have enough. “I don’t know if we have enough.” And so guess what they do, they have to keep working because they never learn how to orchestrate cash flow. My challenge to you is to get off the dime and do something for yourself or your family. Do it now, quit pretending like just chewing away at your 401k is going to get you there. Because you don’t know, your financial advisor doesn’t know. Ask your financial advisor what their net worth is.
Ask them how they produced it. Most of them, won’t tell you. They are just trading time for dollars like you are. I’m sorry, but that’s just the way it is. Go figure out how to build capital assets. That’s what set me free. It wasn’t my dental practice; it wasn’t the stock market, it wasn’t my 401k even though I had one, it was real estate assets that I had started building from when I was in dental school.