If you ask your grandparents, or even parents, you’ll notice that retirement strategies haven’t exactly kept up with the times.
The way we make, save, and spend money has definitely changed—doesn’t it make sense for retirement to adjust as well?
To be fair, retirement plans have evolved over the years, just not enough to work the way we need them to in this day and age.
I’m here today to present an alternative to the 401(k)s and traditional IRAs: invest local.
With the potential to help retirees both build wealth and create a sense of purpose, local investing strategies make up for the shortcomings of traditional retirement plans.
Let’s take a look at how you make your “golden years” truly shine.
A Brief History of Retirement
The idea of a formal retirement plan was first introduced by German Chancellor Otto von Bismarck in 1881. His social insurance program provided pension annuities for workers who reached the age of 70, financed equally by employers and workers.
At that time, the average life expectancy was around 70 years, which meant that only a few people would benefit from the program.
In the United States, the Social Security Act was established in 1935 for retired workers aged 65 and older. Private pension plans also became more common during this time, as many employers began offering them as part of their benefits packages.
The Revenue Act of 1978 introduced the 401(k) account—a significant innovation in retirement planning. This act continues to allow employees to defer taxes on a portion of their income, which can be invested in a variety of financial instruments for long-term growth.
As life expectancy continues to increase and concerns about the sustainability of social security and pension systems grow, retirement plans are struggling to keep up.
As a result, some retirees are now electing to work part-time after their official retirement, while others are exploring alternative investing strategies, such as self-directed retirement plans and local investing.
The Flaws of Traditional Retirement
Today, people live well into their 80s and beyond, leading to a longer retirement period than ever before.
Unfortunately, many people are not financially prepared to maintain their desired standard of living throughout their retirement years. Relying on social security, pensions, and personal savings may not be sufficient to cover a 20-30 year retirement period considering the increasing cost of living.
Far from daydreams of piña coladas at the beach, the desire to stay engaged in meaningful activities during retirement has also become stronger. The traditional view of retirement as a period of leisure and relaxation is no longer universally appealing.
As Neil Pasricha’s analysis of Okinawans shows, people don’t necessarily want to retire and do nothing—they want a reason to wake up in the morning.
Many retirees are now looking for opportunities to continue contributing to society, both financially and emotionally:
Passion-driven part-time jobs, volunteering, and even local investing.
The Potential of Local Investing
This shift towards a more active and purpose-driven retirement means local investing is now a viable alternative to traditional retirement strategies.
While personal wealth is essential for a comfortable retirement, it also plays a crucial role in shaping the communities we live in.
In that line, our investment choices can have far-reaching consequences, affecting not just our financial well-being, but also the economic landscape of our local communities.
By focusing on local real estate investing, you can diversify your investment portfolio and actively contribute to the growth of your local community. This is what we like to call “double duty” investing.
This dual-purpose strategy can offer a more fulfilling and meaningful way to invest, aligning personal wealth-building objectives with the desire to make a difference in the vicinity around us.
There is a staggering amount of money in retirement accounts across the country. Imagine the impact on local economies if just a portion were redirected to local businesses.
For example, the North Carolina retirement fund has around $90 billion in assets. If just 5% of that were invested locally, it would create a significant boost for community commerce.
Options for Investing Local
There exist a number of different strategies when it comes to investing in your local community. One of our favorites is mid-market real estate.
- Mid-market real estate has a low correlation with the stock market and other traditional retirement assets.
- Thanks to Regulation Crowdfunding (Reg CF), you can invest directly in a mid-market real estate project via a Reg CF platform (no special investor status necessary!).
- Minimums are low and accessible.
- First-mover advantage means that you’re so close to the investment opportunity, you will always be among the first to know.
- After you invest, the project develops before your eyes, a walk or short drive from your front door. Keep it in check, and know what’s going on.
Ultimately, local real estate investing puts you in a position to get that extra funding you need for retirement (or even in retirement), plus you get to see your local economy thrive.
Another way to invest locally is through a self-directed individual retirement account (SDIRA).
Unlike traditional retirement accounts that limit your choices to stocks, bonds, and mutual funds, SDIRAs enable you to take control of your investment decisions and diversify your portfolio through a wide range of investment options—including local real estate.
And the reason they’re called “self-directed” is because you manage it directly.
Together, the self-directed plus Reg CF route offers investors a low-friction, accessible, and straightforward path to building a strong portfolio on their terms. By integrating SDIRAs and Reg CF, investors can access an expanded selection of investment opportunities in local businesses and projects.
Invest In Your Future With Vicinity
It’s time to rethink retirement.
The Vicinity platform plays a pivotal role in simplifying the process of local investing. We connect investors with local mid-market real estate projects, providing an accessible and user-friendly way to discover your next investment as you plan for your financial future. By embracing local investments, we can create a more fulfilling reality for ourselves and our communities.
So, how can you get started with Vicinity?
Easy: all you need to do is sign up, browse through our available investment projects, and then simply make an investment.
Not ready to invest? No problem! We recommend checking out some of our investor education materials to learn more.