How To Plan for Retirement: 6 Retirement Tips for Real Estate Agents

As a real estate agent, planning for retirement is not as easy as it might be for a traditional employee. However, it is certainly possible. If you’re thinking about starting to retire, read over the real estate agent retirement plan below.

We’re mortgage professionals, but we aren’t retirement experts, so we asked financial advisors to share their best tips for how real estate agents can step up their retirement planning. Check out what they had to say.

Plus we’ve included some bonus ideas at the end of this blog.

Here are 6 must-know retirement tips for real estate agents

1. Work with a financial advisor.

“By working with a wealth manager, they can put together a financial plan — a road map of where they are today and where they need to be in order to retire comfortably. At a minimum, they should look at the following factors:

• They need to know what their post-retirement budget is going to look like.
• They need to consider how much money are they spending
• They need to factor in inflation because the same amount spent today will be more expensive in the future.
• They need to account for health care costs.
• They need to think about long-term care.
• They should create a financial plan and take into account longevity.
• They need to figure out where they will be living and if the cost of living will be cheaper in another state
• They need to look at whether they will have to downsize.
• They need to look at what they have saved and whether it is invested correctly. Are they taking the right amount of risk? Are their asset allocated correctly?
• They need to know how much they will be getting from Social Security”

– Aviva Pinto CDFA®, CDS™, Managing Director of WealthSpire in New York, NY

2. Save 50% of your tax bill.

“Many real estate agents are hustlers and they make more than enough sales to stay afloat, but financial-minded agents will set aside a good portion of their income to pay taxes. However, in addition to paying taxes, agents also need to plan ahead for retirement.

To keep it simple, when agents set aside money for their tax bill, they should also set aside money for their retirement. In my opinion, the best rule of thumb is to take 50% of your tax savings and put that balance in a retirement plan, whether it’s an IRA, SEP, or 401(k).”

– Brian Halbert, VP Retirement Services for WD Pensionmark based in Austin, TX

3. Save your windfalls, too.

“I suggest putting away some money every month and then larger checks when you have big months. A big disadvantage of being commission-based is that it’s much harder to plan and you don’t have money being invested automatically every paycheck like a W-2 employee putting into a 401(k). You are on your own to set these up, be diligent about your savings, and not have all your eggs in one basket.”

– Todd Bryant, Founding Partner of Signature Wealth Advisors, LLC in Orlando, FL

4. Invest in real estate.

“One way to use your real estate skills to your advantage is to invest in real estate. Start building your passive income as early as possible by acquiring rental properties and building out a portfolio of assets. As a real estate agent, you’re allowed to purchase and sell properties just like anybody else, plus you save money because you can simply represent yourself in the transaction.”

– Zach Reece, CPA, Owner and Chief Operating Officer at Colony Roofers in Atlanta, GA

5. But don’t forget to diversify your assets.

“The primary mistake I see many real estate agents make is having the vast bulk of their assets tied up in real estate. Although real estate can be an excellent way to build wealth, more common asset classes such as equities and fixed income should not be overlooked. Diversification is the key to long-term success regardless of the economic conditions we may be facing.”

– Erik Steudle, Senior Partner and Financial Advisor for Good Life Financial Advisors of NOVA in Alexandria, VA

6. Make a plan for your business as you transition.

“One of the greatest advantages of real estate is that you usually have full control over how you run your business. As you approach retirement, consider how you can best mold your business to fit your lifestyle.

If you hope to work fewer hours, strategies such as cutting back on your marketing costs, maintaining your inflow of referrals and transferring them to a trusted agent for a fee, and hiring an assistant to help with the day-to-day operations are all valid options.

There is no one-size-fits-all solution to transitioning into retirement as a real estate agent, but with some delivered planning, agents can land on a solution that will work for them.”

– Jordan Curnutt, Certified Financial Planner with Quantum Financial Planning in Spokane, WA

Some bonus ideas

Saving for retirement as a real estate agent requires different strategies than those in traditional employment. That’s why it’s important to have a wide variety of ideas to choose from. Here are some additional tips you may want to consider:

Leveraging tax-advantaged accounts

• IRAs:
  • Roth IRA: This could be ideal early in your career when income is lower. Contributions aren’t tax-deductible, but qualified withdrawals in retirement are tax-free. Income limits apply.
  • Traditional IRA: Offers immediate tax deductions on contributions, but withdrawals in retirement are taxed as income. No income limits but may not be deductible if covered by another plan.
• Self-Employed Retirement Plans:
  • Solo 401(k): Similar to employer-sponsored 401(k)s, but with higher contribution limits and flexibility for business owners.
  • SEP IRA: Simplified to manage, allows employers to contribute to employees’ IRAs (including their own) up to a set percentage of salary.
  • Self-Directed IRA (SDIRA): Offers wider investment options, including investing in real estate, which can be appealing to realtors.

Common sense strategies

• Set up automatic transfers: Schedule regular transfers from your income to your retirement accounts to automate savings.
• Live below your means: Track your expenses and create a budget to avoid lifestyle inflation as your income grows.
• Pay yourself first: Treat your retirement contributions like a fixed expense, prioritizing them before discretionary spending.
• Seek professional advice: Consult a financial advisor specializing in self-employed individuals for personalized retirement planning strategies.

Additional tips for real estate professionals

• Consider your income fluctuations: Adjust your savings goals and contribution amounts based on busy and slower periods.
• Utilize real estate knowledge: Investing in rental properties through your SDIRA can be a way to leverage your expertise and build retirement wealth.
• Stay disciplined: Don’t dip into retirement savings unless absolutely necessary. The power of compounding interest over time is crucial.
• The National Association of Realtors® (NAR) recommends that realtors aim to save 20% or more of their income for retirement. They also offer resources and guidance on retirement planning for their members.
• The Certified Financial Planner Board of Standards (CFP Board) emphasizes the importance of tax-advantaged accounts like IRAs and Solo 401(k)s for self-employed individuals like realtors. They also advocate for seeking professional financial planning advice to create a personalized retirement plan.
• The Society of Actuaries (SOA) publishes research and analysis on retirement trends and challenges. Their findings support the need for realtors to start saving early and choose appropriate retirement vehicles to meet their long-term needs.

Remember, the best retirement plan is one you stick to consistently. Start early, choose the right vehicles, and adjust your approach as your career and income evolve. With careful planning and dedication, you can achieve a comfortable and financially secure retirement.

And as always, consult with a financial professional who specializes in retirement accounts before acting on any advice.