Why Some Americans Invest in Real Estate as Their Retirement Plan
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Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Here's your Money Briefing for Monday, July 1st. I'm J.R. Whelan for The Wall Street Journal. Millions of Americans tap into their 401k savings to fund their retirement. But for others, investing in real estate is their retirement plan.
Some retirees say they like building a nest egg that is a bit more concrete, that they can knock the walls and open the doors and look at the kitchen. And they might find that the stock market is a bit too volatile. And they see that the real estate, it seems more steady.
We'll talk to Wall Street Journal personal finance reporter Veronica Dagger after the break.
Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Some retirees are using their savings to invest in real estate.
Why do some retirees choose real estate over 401(k)s for retirement?
WSJ reporter Veronica Dagger joins me. So, Veronica, why would someone consider real estate as an alternative to using the stock market to retire?
Well, some retirees say they like building a nest egg that is a bit more concrete, that they can knock the walls and open the doors and look at the kitchen. And they might find that the stock market is a bit too volatile. That's how they perceive the stock market. And they see that the real estate, it seems more steady. They could get rental income from it. They could get tax breaks. They could become a landlord. For some people, that's really appealing.
You and Ann Turgason spoke to several retirees for your story. Did they work in real estate in their careers?
Some people did. Some people were general contractors. Other people were realtors. But a few other people just took this up as a hobby.
What reasons do retirees give for preferring tangible real-estate assets?
There's plenty of resources online that can get you up to speed. And then, like any job, the best experience is by doing it. So that is the primary experience of most of the people we spoke with.
But some of these investors withdrew lots of money from their retirement savings to invest in housing. How risky is that?
It's pretty risky because if things don't work out, you could be left without a retirement savings and also be left without a property. One guy we spoke to, he didn't withdraw the money from his retirement savings, but he did take money out and he ended up having a foreclosure and lost over $300,000. So this is an industry where you can really lose your shirt. You can make a ton of money, but you can also lose everything. But it's like any investment, more risk, more reward.
So you mentioned you can collect rent along the way. How would you make lots of money like some people you mentioned?
Well, there's a couple ways. Some of these folks were lucky in that they had really good timing. One guy I spoke to bought some of these homes 40 years ago. And 40 years ago, when you just think of a place like New York, you could have bought a brownstone in a nice section of Brooklyn for $40,000. Now that same brownstone is worth about $3 million. And so there's this great thing in real estate called depreciation. But it's a lot of appreciation. And so that is a huge benefit. So people reap that benefit. Granted, that is a paper benefit. So you don't actually benefit from that until you sell the property.
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