How Does the Housing Market Impact Your Retirement?

We talked a bit earlier about the housing bubble going on right now. If you’re out there, and the housing bubble has the potential to affect you or your retirement, or you’re worried about retirement in general, now is a great time to reach out to us and get a second opinion. Why should you take advantage of this opportunity? I’m going to give you a reason, and that reason is a guy I’m going to call “Charlie.”


I’m a transplant; I live in Texas now, but I used to live in Michigan. Back in the summer of 2007, when I was living in Michigan, Charlie attended one of our events. He came in and wanted to talk to us about his retirement planning. He had a 401K, an IRA, and at the time was an investor in real estate. He was doing what a lot of people from Michigan do. Many retired people in Michigan don’t like the cold, so they go south for the winter, mostly to Florida. They’re called “snowbirds.”


Charlie was one of these snowbirds. He would go to Florida during the winters, and during this time he started getting into house flipping. He would buy a house in Florida, hold it for a couple of months, flip it, and make some decent money off of it. In the summer of 2007, he found out that he could use his IRA to do this, which is why he wanted to talk to me. He was managing his own IRA with Vanguard, and he told me he was thinking about turning it into a self-directed IRA so he could use it for flipping houses. I told him it was a bad idea to have all his eggs in the same housing market “basket.” Furthermore, the housing market was crazy hot at the time. He told me he couldn’t possibly lose money doing it. I argued that you can ALWAYS lose money. He wasn’t convinced. To him, it was the easiest thing in the world, and he thought it wasn’t going to stop. People were moving to Florida from all over the country, to take advantage of its tax-free benefits.


I realized he wasn’t coming to me to evaluate whether I should manage his money for him. He was coming to me because he wanted a Certified Financial Planner to tell him yes, it was a good idea. He wanted a thumbs up. I didn’t give him the affirmation he was seeking because I didn’t like the idea.


Warren Buffett says something like, “Be fearful when others are confident or greedy, be confident or greedy when others are fearful.” In other words, sell when everybody’s happy, and buy when everybody’s scared. In any market, if things are going super well, that means it’s probably topped out. The party is not going to go on forever. Eventually, everybody’s going to pass out from drinking too much and you’ll end up in the next morning where it’s ugly.


I told him, that yes, everything was great, but if I were in his shoes, I might consider it time to sell. The market was probably near the top. Charlie didn’t want to listen to me, and we parted ways. I met him about a year and a half later in 2009. When I ran into him again, he told me he wished he had listened to me. He’d gotten torched when the housing bubble burst. He’d lost so much money he didn’t think he would ever be able to recoup what he had started with.


Why do I bring this story up? How does it affect you? You might be sitting there asking why you should care, especially if you don’t have any money in real estate. Maybe you have a diversified portfolio and you’re feeling confident.


You should care because when the housing market goes south, I can almost guarantee that the stock market will follow. The housing markets go south when the economy is not doing well. Interest rates are rising, and the housing markets are leading indicators for what the stock market  will do. This is one of those storm clouds on the horizon that we’ve talked about. If the housing market is starting to go south, what does that tell you about where the markets might be going?


If the markets go down, and you lose another 20-30% in your portfolio, how is that going to affect your retirement? What if you’re already retired? Are you going to have to go back to work if that happens? If you’re thinking about retiring in a couple of years, are you going to still be able to if that happens?


That’s why you must care about this stuff. You need to watch what the housing market is doing. If it’s starting to crash, the stock market will probably crash too. Over time, both the housing market and the stock market will go back up. If you’re on the younger side, that’s okay. I had a conversation with one of our client’s children yesterday who was excited by all that’s happening. He’s putting in as much money as he can. He’s loading up when the markets are down. That’s awesome when you’re 29 or 39 or maybe even 49, but once you get north of 55, it’s not as awesome anymore; it might crush your retirement planning.


That’s why you should care and that’s why we put together this free personalized Retire Right Report for you. You might be out there assuming it’s all going to be okay, but if you’re already retired, it might not be okay. If you want to retire in the next few years, it might not be okay. It is so important that you make wise decisions. Your retirement is important. That’s why we’ve created our Retire Right Report. Right is an acronym that stands for Risk, Income, Growth, Healthcare, and Taxes.


This report gives you an accurate view of all five of those areas in a simple and easy-to-read format. It’s the easiest way for you to make sure you’re on the right track when it comes to your retirement. It helps you identify if you’re in good shape in all these areas or just some of them. The tax part particularly is unbelievable. It’s crazy how much money people will give to the IRS, not because they have to but because nobody has shown them a better way. You have everything to gain and nothing to lose.


Give us a call and we’ll schedule a time to connect and have that initial conversation so we can determine the baseline for where you are now, and how we can best help you get on track.



Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Centennial Advisors, LLC makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third party websites that Centennial Advisors, LLC may link to are not reviewed in their entirety for accuracy and Centennial Advisors, LLC assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Centennial Advisors, LLC. For more information about Centennial Advisors, LLC, including our Form ADV brochures, please visit https://adviserinfo.sec.govor contact us at 512.265.5000.



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