Summary

Ron and Rhonda Burgundy plan to divest their $1.2M real estate portfolio over 7-10 years to maximize and replace their rental income with guaranteed income sources for a stress-free retirement.

Abstract

Ron (64) and Rhonda (62) Burgundy, with a net worth exceeding $2M, are looking to retire from property management by systematically selling their real estate portfolio, which currently generates$ 60,000/year in income. They intend to start this process in 4 years, selling 25% of their holdings every 2 years. Their strategy involves using the proceeds from each sale to purchase guaranteed lifetime income vehicles, aiming to not only replace their rental income but also increase it. They have a diversified financial plan that includes a brokerage investment account, a pension, social security income, and liquid investments to combat inflation and provide discretionary spending money in retirement. The divestiture is expected to yield approximately $184,000/year of guaranteed retirement income, significantly more than their current rental income, and leave them with$ 700,000 for discretionary spending.

Opinions

The author suggests that the Burgundys' strategy of divesting their real estate portfolio and reinvesting in guaranteed income sources is effective for achieving a stress-free retirement.
The article implies that the Burgundys' approach will not only replace their current rental income but also substantially increase it, enhancing their retirement lifestyle.
The author expresses a positive view on using a portion of the portfolio for discretionary spending, emphasizing the importance of enjoying retirement through activities like traveling and pursuing hobbies.
The article takes a clear stance against the alternative of maintaining the real estate portfolio, citing the headaches and expenses associated with property management during retirement.
The author promotes the benefits of having guaranteed income sources, such as annuities, to provide financial security and inflation protection in retirement.

Divesting Ron & Rhonda Burgundy’s $1.2M Real Estate Portfolio (& increasing retirement income by $72,000/year)

I’m Ron Burgundy?!?!

Just kidding.

I am working with a couple that has a $1.2M Real Estate portfolio that they want to systematically sell over the next 7–10 years.

Their main objectives are to retire slowly from property management but maximize and (hopefully) fully replace their rental income with other guaranteed income sources so they can retire stress-free.

The names have been changed (obviously), and I had a little fun with it… but this is a real example of how to effectively deploy a real estate divestiture and actually provide an increase in guaranteed income in retirement.

Let’s get started:

⭐️The Deets for the Burgundy’s⭐️

✅ Ron (64) and Rhonda (62) Burgundy

✅ Net Worth = $2M+

✅ $600,000 in a brokerage investment account

✅ Ron’s Pension = $1,000/month (+2%/year inflation)

✅ Rhonda’s part-time income = $20,000/year for 4 more years

✅ $40,000/year of social security income (@ 70) (which they did not want to include as part of the income analysis)

✅ Current real estate holdings provide $60,000/year income

✅ They want to divest their real estate portfolio starting in 4 years

✅ They’ll sell 25% of their real estate holdings every 2 years

✅ They want to start the process of retiring in 4 years (when they begin systematically selling off their real estate holdings)

⭐️The Strategy⭐️

✅ $600k in their brokerage investment account will remain for discretionary retirement spending (this money can be invested more aggressively than many other retirees because they have guaranteed income sources)

✅ In 4 years they will sell the first 25% of their real estate holdings ($300,000) and purchase a guaranteed, lifetime income vehicle

✅ Every 2 years, they will sell another 25% and purchase more guaranteed income to replace the income from their real estate portfolio

✅ They will combat inflation with Ron’s pension, social security, and their liquid investments (their brokerage investment account)

✅ They will fully replace the income from their real estate holdings in 7 years (actually increasing their total guaranteed income)

⭐️The Results⭐️

✅ Real estate divestiture #1 provides $25,000/year of guaranteed, lifetime income (note: each 25% sale of the real estate portfolio will reduce the rental income by approximately 25%. So 25% of the current rental income is approximately $15,000 per year)

✅ Real estate divestitures #2, #3, and #4 provide $30k, $36k, and $41k/yr of guaranteed income respectively (see income analysis below)

Rental income is systematically replaced in 4 installments

✅ They have approximately $700,000 of discretionary spending money to travel, go sailing, skydive, rent speedboats, and go to every winery in America during retirement

✅ They have $40,000/year of social security income that will continue to grow with cost-of-living adjustments (not modeled in the income analysis)

✅ They have $12,000/year from Ron’s pension starting @ age 65 and growing at 2% each year.

✅ They have $132,000/year of GUARANTEED lifetime income from the real estate divestiture (they systematically more than doubled the $60,000/year they were making from their rental income)

✅ TOTAL: $184,000/year of guaranteed, retirement income, inflation-protection, AND $700k of flexible, discretionary money to use for ANYTHING they want in retirement….

❌ The Alternative is to keep their real estate portfolio (reducing their retirement income by approximately $72,000/year) PLUS forcing them to continue dealing with the headaches and expenses of managing a real estate portfolio when they want to be doing other things in retirement❌

I don’t know about you, but I would rather be enjoying the wineries 🍷 and sailboats ⛵️ in retirement… how about you⁉️

Like this blog? Support me & other independent writers here & check this blog out in the meantime: Why Saving 10% of Your Income for 30 Years Isn’t Enough (with the math)

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