May 2026 - Money Machine - Designing Your Pension

A lot of people are living paycheque to paycheque. It seems that regardless of their income level, each paycheck goes to pay living expenses and the odd luxury along the way. The problem is, what happens when the paycheques stop coming? Layoff, plant closure or retirement? I read recently that the average senior had about $1,500 cash saved up. Not much with today’s cost of living. Of course, with our social network, there will be some money coming in, C.P.P., Old Age Security, maybe even a small company pension. Just enough to get by. Not enough to really enjoy life. I have a rental property, as you know, and my heart goes out to the many seniors I come across who simply don’t have enough income to afford a decent place to stay. They subsist in a basement apartment, and to them, a special outing is a trip to Swiss Chalet. Not that there’s anything wrong with that. But after a lifetime of working, it would be nice if they could afford some of the finer things in life. The problem now is that at their age and situation in life, things are never going to change. They needed to plan ahead. And they needed to start early. Something you can do now. Let’s talk for a minute in today’s dollars? If you were to retire today, how much income would you like to live the lifestyle you’d want to have? Suppose your answer is $100,000. Now double it. Why? Two reasons. First, because most people are too conservative when it comes to the realistic costs of living. And secondly, because it costs more to live when you are on holiday (retired) than when you are working. Travel, eating out, hotels, cruises, etc. So, let’s start with a pension goal of $200,000 annually. And let’s plan on getting there by developing a passive income stream. Now, I’m going to suggest your real estate portfolio can achieve a 5% cap rate. That’s the annual return on your real estate investments once they are all paid for. But in doing this exercise, most people look at hard costs: taxes, insurance, utilities. But they neglect to factor in a couple of realities: (i) vacancy and bad debt, and (ii) repair and maintenance. I would conservatively set these at 5% and 5% of gross rental income. After years of doing this, I’ve found that the first category tends to run less than 5% and the latter category more than 5%. But 10% combined is a fair number to work with. But this is of gross rental income. Not net profit. In reality, they will probably reduce your cap to about 4.5%. Now, if you want a $200,000 a year income and you can expect realistically to receive 4.5% on your gross property value, how much rental real estate do you need in your portfolio to get your desired result? $200,000 _____ ________ = $4,444,444 4.5% So how do you achieve a $200,000 yearly pension? You invest in rental real estate until you have acquired $4,444,444 in total value, and then you pay off the mortgages. Sound simple? It is. Not necessarily easy, of course. It’ll involve some sacrifice along the way and a lot of delayed gratification, but like anything worthwhile in life, it’s worth working toward, and it can be done. By you. In your present situation. But you need to have a plan. And you need to start today.