No Retirement Plans for REALTORS®: A Devastating and Harsh Reality
If you are a real estate agent, you'll want to read this. I'm going to tell you about the solution to a big problem in the real estate industry— a lack of retirement planning and savings.
First, it's not all bad news. Trust me, the next 5 minutes will benefit you, your colleagues, and your real estate association. You'll want to master this solution to build retirement wealth not just for you, but for your clients as well.
Although I'm not a REALTOR®, I've worked with real estate agents for many years. I've had the opportunity to learn more about how agents market their businesses, what's important to them and their clients, and the challenges to save for retirement.
But let's directly address the elephant in the room: Retirement.
Lack of Time, Money, and Knowledge…. Bologna!
From my many years of working with agents and much research, I've learned that most successful real estate professionals save for retirement. They have Traditional IRAs, Roth IRAs, or a small business retirement plan like a SEP IRA, SIMPLE IRA, or Solo 401k. But the majority are not saving and there's a "reason" (more like an excuse): It’s a lack of time, money, and knowledge.
With a hectic schedule, and lack of money and knowledge, how do some find time to plan for retirement? I had to ask because this is probably the last thing on a real estate agent’s mind, right? I also needed to know because it helps me since IRAR Trust is a partner with the California Association of REALTORS® member benefits.
What I found was a consistent theme in their responses: “I started too late. I wish I would have taken the time to do it sooner.” I also found that the most successful REALTORS® are always learning. They want that competitive edge to grow their business. They are also the ones saving for retirement. Some are even investing in real estate with retirement funds. Yes! You can invest in real estate with your IRA.
Here's how they got started and what they are doing to retire comfortably.
Time…spend some on education before you run out.
I’ve met hundreds of REALTORS®, I can say with confidence that most are very busy, self-motivated entrepreneurs. They are passionate about their industry (which I admire greatly because I am too) and they are very competitive.
They spend a lot of time networking at events, in meetings, tradeshows, etc. Their days start very early and end very late, almost always. There is very little time for retirement planning.
However, successful agents like to learn and make time to learn something new. They don’t have a choice if they want to stay ahead of the competition. But they're not just taking time to learn how to market to their database, they are also spending time on financial wellness. They are learning how to build wealth.
So if you are a REALTOR® take time to learn about self-directed retirement plans. This is what most successful real estate agents are doing.
Lack of money? Never! Start small.
Real estate agents get paid on commission for every sale, and they usually don’t take the full commission due to commission splits with other agents and brokers. This means that they don't have a regular salary, so their income changes regularly. This also means they don't have access to an employer-sponsored retirement plan because they are self-employed. So, they are responsible for setting up a plan to save for their retirement.
According to the National Association of REALTORS®, in 2020 the average real estate agent’s salary was approximately $43,300. If you live in California, how can you possibly save for retirement on this salary?
Well, I know for a fact that many members of the California Association of REALTORS® are saving for retirement in self-directed IRAs. They have Traditional IRAs, Roth IRAs, or have a small business retirement plan like, a SEP IRA or Solo 401(k).
Relevant Article: 5 Reasons Every REALTOR® Should Have a Self-Directed IRA
Some got started by opening an account and saving a small, fixed amount monthly. I’ve seen deposits from $50 to $500 per month. Others transferred their old 401(k) from a previous job into an IRAR self-directed IRA and make monthly contributions. The point is, they got started.
So, it can be done. Just refrain from buying that name-brand scarf or an expensive bottle of wine and open an IRA instead. You can open an IRA online easily. After you open your IRA, set up a monthly payment (contribution) to your IRA through your bank account, just like you would a bill.
Knowledge: the power to save for retirement.
Many real estate agents don’t save because they are not familiar with investments offered by most banks, like stocks, bonds, and mutual funds. But you can invest in what you know: real estate.
Real estate has been allowed in self-directed IRAs since 1975 and it has only increased in popularity since then. What was once a secret of the rich is now a popular investment strategy for many. IRA investors often buy and sell more than one property, so they need an agent familiar with the process.
But most real estate agents hear about self-directed IRAs for the first time from a client trying to do a real estate transaction. Then, immediately they want to learn how to incorporate this strategy into their marketing, or how to transfer their retirement savings in a Schwab IRA or Fidelity IRA to a self-directed IRA to buy real estate.
Get ahead of the game. Agents who work with investors should be familiar with this strategy because it's another source of creative funding— an excellent opportunity for the successful real estate agent to lead by example.
In a Nutshell
When a real estate agent invests time to learn about self-directed IRAs, they discover a new way to build business and retirement savings. This is what successful REALTORS® are doing now.
There is no such thing as not having enough money to save for retirement. You can get started with as little as $50. So don't let time pass you by because tomorrow's successful retirement comes from today's knowledge.
Real Estate Agents Retirement Plan FAQs
Do real estate agents get a retirement plan?
Real estate agents are usually self-employed. This means they don't have access to an employer-sponsored retirement plan like a 401(k). So, they are responsible for setting up a plan to save for their retirement.
How do Realtors save for retirement?
Realtors are usually self-employed and can open a small business retirement plan like a SEP or SIMPLE. They can also establish an individual retirement plan such as a Traditional IRA or a Roth IRA if they qualify
What is the best retirement plan for real estate agents?
The best retirement plan for a real estate agent is one that allows them to invest in a wide variety of assets including real estate. A self-directed IRA allows investments in real estate.