The $1,000-a-month rule for retirement

A recent article in MoneySense (August 2014) was entitled “The $1,000-a-month rule for retirement”. The article is based on “The 1,000-Bucks-a-Month Rule” by US based financial planner Wes Moss.

Suppose you want $1,000 per month in additional income at retirement. Find $1,000 per month at the top of the table below. Assume the rate of return is 5%. Find 5% in the table under Interest Rate. The corresponding Investment Funds = $240,000.

You will have to accumulate $240,000 at retirement to create an additional $1,000 per month income. And do that while you are paying your mortgage, raising your family, and paying everyday living expenses!

 

$200 per month                $600 per month             $800 per month               $1,000 per month

InterestRate InvestmentFunds InterestRate InvestmentFunds InterestRate InvestmentFunds InterestRate InvestmentFunds
2% $120,000 2% $362,000 2% $480,000 2% $600,000
3% 80,000 3% 240,000 3% 320,000 3% 400,000
4% 60,000 4% 180,000 4% 240,000 4% 300,000
5% 48,000 5% 144,000 5% 192,000 5% 240,000
6% 40,000 6% 120,000 6% 160,000 6% 200,000
7% 34,286 7% 102,857 7% 137,143 7% 171,429
8% 30,000 8% 90,000 8% 120,000 8% 150,000
9% 26,667 9% 80,000 9% 106,667 9% 133,334
10% 24,000 10% 72,000 10% 96,000 10% 120,000

OR….Turn Your Mortgage Into a Pension!

Create that same $1,000 per month additional income without having to sacrifice your current standard of living to accumulate that future nest egg. And the best part is that you are creating additional cash flow right away – not having to wait until retirement.

 

Turning My Mortgage into a Pension

When my parents were starting their life together, the cost of buying a house was significantly lower than it is today. Buying a house then was a lot easier; it didn’t take very long to save up enough money to put a down payment on a home. Can you believe that in 1940 the average price of a house was $6,550, a gallon of milk only 34 cents?

Since 2000, the price of houses across Canada has risen 127%; nearly 50% since 2006! So how can we afford to buy a house now? Housing is expensive and I am one among many who see no relief in sight. It feels as if housing is likely to become even less affordable later this decade if interest rates return to more historical levels, and mortgage rates move higher. So what are my options? In major cities the cost of a house is almost beyond belief! In Vancouver, the average cost of a detached home is $1,361,023, an increase of $139,986, or 11.4% this year alone. In Toronto, the average cost of a detached home is $965,000, a 13.2% increase from last year. How can I afford to pay off a mortgage on houses that cost so much?

Let’s say that my career spans 40 years, and my average income each year is $50,000, this means I will earn $2,000,000 in my lifetime. If I am married, and my partner makes the same income, our lifetime earnings would be $4,000,000. But you have to subtract living expenses – rent, tuition, food, vacations, furniture, entertainment, insurance, raising children, utilities and retirement savings. As you might know from experience, it adds up very quickly and if you have a mortgage does that really leave you any room to save for retirement? What if you could turn your mortgage into a pension instead? By turning your mortgage into a pension you would be in control of your cash flow and better able to prepare for the future.

So how do you turn your mortgage into a pension? There’s a new book coming out next week on Sept 1st, called “Turn Your Mortgage Into a Pension.” The book is easy to understand and explains the difference between traditional and all-in-one mortgages, and how the efficiency of the all-in-one mortgage can increase your monthly cash flow. It also informs you about where you can direct that cash flow towards creating an immediate monthly pension. And best of all, your standard of living doesn’t have to change. The strategy doesn’t require any financial sacrifice, it actually increases your monthly cash flow and teaches you how to redirect money that is currently going to the bank in interest and the government in taxes and use that money to create a pension plan. So is this going to change the way we think about buying houses?