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I RECENTLY MENTIONED to my wife’s cousin that I’m taking required minimum distributions from my IRA. He won’t have to—because he doesn’t have an IRA. Instead, he keeps his car trunk full of cash.
He’s in the car business. He buys and fixes cars, all out of his mother’s two-car garage. He keeps cash to buy used cars at rock-bottom prices. People are willing to sell a car cheaper if they can get the cash immediately.
His entrepreneurial style is the opposite of my approach to earning and investing. I followed the standard method—work for someone else and collect a paycheck. Pay my bills and save what’s left over. For me, an IRA made investment sense because it sheltered my money from taxes, at least until withdrawal. Later on, I switched to the 401(k) plan at work, which was an even better option for me.
My savings were automatically deducted from my paycheck and deposited into the 401(k). The amount I could contribute to the 401(k) was far more than the IRA contribution limit, which is $7,000 in 2024 or $8,000 for workers age 50 or older.
When I left my employer, I rolled my 401(k) into my IRA. And that’s where my money sits today because I was—and still am—basically a conservative saver.
I’m curious about my wife’s cousin and others like him, those who don’t have a 401(k) or IRA and who run greater risks than I’d ever be willing to take. A second person in this category is my wife’s childhood friend, who says she’s married to a man who’s “house rich and cash poor.”
When my wife and I visited them at their summer home on the Hudson River, there was a bulldozer sitting on their property. My wife’s friend said her husband bought it because someone needed cash and was willing to “let it go” at a low price. The bulldozer is now a lawn ornament. If he finds a buyer, that lawn ornament will be converted back into cash.
That’s not exactly as liquid as my IRA, but it does represent a store of value—provided someone wants to buy it. This isn’t the only real property her husband invests in.
Their Hudson River house is not their main home. Their main house is an old farmhouse sitting on many acres. Her husband rents it out. Any money he clears from the rental house he rolls into his next deal. Money doesn’t rest in his savings account for long.
Take their other vacation place, which is down in Florida, where they spend their winters. He bought an apartment building there, plus a condominium in a 55-plus retirement village. They live in the condo in the winter months, while he handles any maintenance needed on the apartment building. It may work for him, but it wouldn’t be my kind of retirement.
I have a third example of a non-traditional retirement investor. I recently asked my old college roommate what he’s doing about his RMDs. He said nothing—he doesn’t own an IRA. He was a math teacher who, at various times, worked in Catholic schools, high schools and colleges. His pension is less than those who spent their career in a single school system.
How does he supplement his pension? He’s a “picker,” someone who buys odds and ends with the hope of selling them for a profit. He goes to auctions and garage sales, and buys stuff he thinks he can resell for a higher price. His small house is chock full of stuff. His yard has plastic tarp mounds covering the larger items that won’t fit inside his home.
The problem with any market, whether it’s the stock market, the cattle market or the used car market, is that there are no guarantees you’ll be able to sell your goods for a profit. My old college roommate’s approach has that risk in spades.
All three of these men have an attachment to real property, whether cars, rental properties or odds and ends. Do any of these methods measure up against the tried-and-true method of acquiring wealth using an IRA or similar account?
If you have success finding bargain properties and selling them at a profit, it could work. I haven’t followed these three men’s endeavors long enough to gauge how they’re doing. I can say that if excitement turns you on, then dealing in used cars, bulldozers and apartment houses might be just the thing.
My approach to investing isn’t exciting. Just the opposite. Investing in an index fund within an IRA is like watching paint dry. To stomach this slow-but-steady approach to accumulating wealth requires a boatload of patience. If you don’t have it, you’re liable to buy too late in the cycle and sell too soon—and perhaps instead you should keep an eye out for unwanted bulldozers.
David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave’s earlier articles.
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You’ve defined work. These are not retirement; these are continued work. And there may be stores of value there, but they are not money (except for the cash in the trunk). If you love doing it, keep doing it, but it’s not the same as an accessible store of value.
The point of bank or investment accounts is that they are not not work. We can manage them with minimal effort or we can pay someone else a fee to manage them. And with a phone call or a click, cash is available within a few business days.
None of this matters if the economic system collapses. You need a bunker full of food and water and an arsenal to protect it. That’s retirement planning!
In my mind the guys you describe are entrepreneurs. They are for all intents and purposes small business owners. I know many that fall into this category, hustlers who manage to eat and keep a roof over their heads but fail to save, manage, and score the 40 required credits needed for Social Security.
On the other hand I also know some that built fruitful little entities complete with IRAs and Social Security.
Me? I’ve done it both ways Dave. An employee until age 50, I liked what I did was happy to watch the paint dry. Then until age 70 I did my own thing and liked that too. But I never abandoned my paint drying ways.
“Work ’til you die” isn’t just failing to plan, it’s planning to fail. A well-funded IRA keeps kicking off interest, dividends, and capital gains with no physical effort on the owner’s part. Managing “stuff” grinds you down and wears your body out. But many, if not most, people will still be alive when they are no longer physically able to find, buy, fix, store, and (finally) re-sell their stuff; hence, no income. Not a nice place to be.
For what it’s worth I don’t think the guy I referenced needs to keep doing it. It’s in no way subsistence living. I’ve no idea what he has tucked away in traditional retirement assets for the day his mental or physical capacity fails but I suspect he has a fair amount in choice personal collection items and the buyers he will call if and when he chooses to liquidate.
The biggest risk to me is if his contact book is so opaque no one could pick it up if he is hit by a bus etc.
Fun article. I’m perfectly happy with my boring IRA – I don’t even watch it most of the time.
Thanks for an interesting story Dave. I’ve seen some interesting retirement stories. A high school friend’s dad had a hobby of restoring furniture. In retirement he would frequent yard sales for good deals, refinish the piece, and sell them. It supplemented his pension and Social Security.
It might work for the real property addict as long as they are ablebodied.
But the workload on the survivors might be challenging.
I would not like to burden my husband with the divestment of all the stuff.
People do what they know. I know a guy who grew up around Hollywood in the 70s who has had a very successful life kickstarted by buying a truck load of set clearance stuff with a buddy in his early 20s. He says he’s worked less than 2 years in an employed job in his life and also doesn’t think he’ll ever stop.
Memorabilia, antiques, vintage militaria – broking/ dealing in a wealthy West Coast environment doesn’t seem that risky to me.
The passive investment route tends only to be attractive to those who know they don’t have an edge in alternate ways of securing income post regular work.
The “flea market dealer” and “car dealer” are taking much more risk, IMO. They’re doing what I’d regard as the equivalent of investing in penny stocks. “Real estate dealer” is more like a private equity investor – illiquid, but often decent returns.