Is It Too Late?

If you’re one of the millions of Americans who’ve reached age 45 with little retirement savings or even a plan to speak of, don’t despair. You have always heard the adage that it’s never too early to start investing, but is it ever too late? Of course not and I’ll tell you why.

Think about it this way. You hear countless stories about people retiring early in their 30’s and 40’s – who all start investing in their early 20’s.

Now, if someone who started investing when they were 22 (the standard age of a graduate of a four-year university) can retire at the age of 37, why can’t someone who is 45 retire at the age of 60 using the same investment strategies the retired 37-year-old used from the age of 22?

What are some of the habits and strategies early retirees use to generate wealth that quick?

The key to generating wealth and achieving financial freedom is passive income – the creating of additional streams of income.

Let’s face it, accumulating enough wealth to retire on schedule – even if you start at age 45 – is not gonna happen from taking on an extra shift at McDonald’s. The only way you’ll be able to generate wealth that quickly is to put your money to work for you. Let your money work the extra shifts you can’t.

You become financially free when your passive income exceeds your expenses. – T. Harv Eker

Your money is not limited by a time clock like you are, so why not unleash it to get to work for you? How much do you need and how do you get there?

The current rule of thumb is that you should have about $1 million to just make it through retirement. That’s just to make it through. But you don’t want to just get by, do you?

Don’t you want to be able to visit all your grandkids spread across the country? Visit all those places you’ve only dreamed about? Donate your time and money to those causes near and dear to your heart?

If so, then you’ll need a minimum of $3 million to be truly independent. Where does this $3 million figure come from?

As a general rule of thumb, you should build up a retirement war chest equal to 30 times your annual expenses. So if your annual expenses on food, cars, housing, clothing, travel, etc. are $100,000 per year, which is normal, then you should have $3 million at retirement.

So, what did early retirees do that you can do now at age 45 to accelerate your retirement goals?

Here are some habits and strategies to consider:

Spend Smart. Stop wasting money on destructive assets – assets that only take more money out of your pocket the longer you have them. Expensive cars, fancy clothes, and excessive toys only take away from your capital and they continue draining your capital over time from upkeep. Start spending money on productive assets – assets that grow your capital instead of taking from it as destructive assets do.

Look Beyond Appreciation. Don’t rely on the typical investment strategies of retail investors and financial professionals who rely solely on appreciation for growing a portfolio. Investing in public markets relies heavily on timing and anticipation to profit from growth. The problem is, nobody is good at timing. It’s not too late to invest, but it’s too late to invest like this. It’s speculation and you’re too old to gamble.

You need to look beyond the old buy low/sell high strategy to get ahead. You need to invest in alternative assets with four components that elite investors look for to build their wealth:

  • Income.
  • Appreciation.
  • Non-Correlation to Wall Street.
  • Intrinsic Value.

Assets with intrinsic value that cash flow, grow over time, and that are uncorrelated to the volatility of the broader markets are the surest assets for building wealth quickly and preserving that wealth over time.

Assets with intrinsic value derive value beyond what the investing public is willing to pay for it. A business that generates income from selling a product or service appreciates over time as the demand for its product or service grows and as its customer base expands.

Real assets that collect rent appreciate over time as rental rates grow from increased demand while supply remains stagnant. These are assets with intrinsic value.

Assets with intrinsic value don’t depend on timing and don’t rely on a bigger sucker down the line paying more for something than you did. Someone will always pay more for assets with intrinsic value because they’re a proven commodity.

They appreciate organically over time independent of inflation and independent of what the latest fads mainstream investors are chasing.

Teaming alternative assets with intrinsic value up with cash flow and appreciation – resistant to Wall Street volatility – is the surest formula for compounding wealth through reinvestment of that cash flow in other passive income streams.

  • Save More of Your Take-Home Pay. You should set aside as much of your take-home-pay as possible for investment and you should incrementally increase that savings rate each year. Saving alone will not guarantee you reach your accelerated retirement timeline, however. How you invest those savings will determine whether you reach the finish line.
  • Buy Luxuries with Investment Income. Only when your passive income exceeds your expenses should you splurge on luxuries.

Passive Income from Alternative Assets

It doesn’t matter how much you save if you’re allocating your assets to the wrong investments. Forget traditional fixed-income investments like bonds, treasuries, annuities, CDs, money market accounts, and savings accounts.

None of those are going to pay more than the 3.22% annual inflation rate (based on a 20-year average), which means you’ll be losing money by putting your money in those so-called investments.

Follow the habits of elite investors if you want to reach your retirement goals in time.

Elite investors like university endowments, family offices, and  of their investable assets in private equity and real estate. They like acquiring shares in private businesses (private equity) and commercial real estate that cash flow. That’s how they’re able to achieve returns over 11% annually – through the power of compounding of that cash flow.

It’s not too late to start investing for a comfortable retirement.

If someone can retire in 15 years from age 22, you have plenty of time to build the same wealth from age 45 or 50 and retire at age 60 or 65. The key is to save more of what you earn by increasing income and reducing expenses for investment in alternative assets to create multiple streams of income.

Compounding that wealth will require reinvestment of your cash flow into additional assets generating more cash flow that will all appreciate over time – giving you a nice nest egg when it’s time to finally hit Easy Street.

Just as it’s never too early to start investing, it’s never too late to start investing as well.