I Didn’t Save for Retirement – Here’s My Dilemma

A 47-year-old Reddit user did not save for retirement.

He does own some real estate, and he has a small pension coming to him. However, he is trying to figure out how best to proceed with building a secure future for himself, given the fact that he has no 401(k), IRAs, or any other retirement plan.

His dilemma is whether to sell the real estate in order to invest more, or to keep those assets and come up with another plan. So, what should the Redditor do in order to be able to enjoy his later years free from serious financial concerns?

Running the numbers is the first step to figuring out options

The only way to decide on the best path forward is to take a close look at the numbers. The original poster (OP) explained that he is self-employed and will be getting a pension of around $1,300 monthly — which is obviously not enough to live on. He also has just $30K in savings.

The bulk of his money he does have is tied up in real estate. He has:

• A $250K rental property he owes $40,000 on
• A $220K rental property he owes $80K on
• An $850K home that he owes $420,000 on

He rents the properties for $1,650 per month, and he nets $1,300 monthly from both properties. He also pays $3,200 per month for the home he is currently living in, but he thinks he could rent it out for $4,700 if he decided not to continue living there himself and instead move to a cheaper rental. While he has had good luck with his tenants, he said he is aware that’s not always the experience of landlords.  

So, his dilemma is whether to sell and invest or keep the rental properties. 

Preparing for retirement without investments — is selling real estate the right move?

Based on the Redditor’s current situation, he would have around $2,600 per month coming in from his investments and pension, while he has a $3,200 monthly housing payment. This is not going to be sustainable to retire as the Redditor won’t be able to cover the basics.

Now, he’s obviously not thinking about retiring right now, so at 47, he still has a good 20 years until he reaches his full retirement age for Social Security, which is 67.  And, the reality is he is probably going to have to work at least until his mid-6os, even if he does sell the rentals. He is simply not in a position where his investments are going to give him the income he needs to fund an early departure from work. 

Even in a best-case scenario, he has only around $780,000 in equity across all three properties — and there would be fees and tax implications from selling. So, assuming he could walk away with around $700,000 to invest, that would produce about $25,900 at a safe 3.7% withdrawal rate if he tried to retire now.  That is not enough for the poster to be ready to retire early. 

The good news is, if he invested $700K, earned 8% average annual returns, and let it grow until he reached 67, our compound interest calculator shows he would end up with about $3,262,670.00 — and that’s without any additional contributions. 

This would give him around $120,719 per year in retirement income — which may be enough. He’d likely end up with more if he could contribute some money to his accounts over the next 20 years.

Of course, this would mean giving up his house and rentals, though. He could instead keep those assets and benefit from property appreciation and the income they produce, while ideally also starting to save some of his money in a retirement plan.

The right course of action is going to depend on whether he thinks he’ll earn a better ROI on the real estate than he would in the market. 

Ultimately, the best option would likely be to talk with a financial advisor who can help him figure out which of the two routes would be best — either keeping the real estate and investing elsewhere as well, or selling the real estate and using it to jumpstart his investment portfolio. Many Redditors pointed out the complexity of the tax implications and the importance of making a detailed plan, and an advisor would be a great person to help sort out these issues and ensure that a secure retirement is still within reach. 

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