Why Most Real Estate Agents Cannot Retire

The Average Agent Cannot Retire

Here is a short financial planning survey recently done with real estate sales representatives and the results of this survey were alarming. The average age for agents completing this survey was 48 years old.

Here are the survey questions and responses:

Are you currently saving for retirement on a consistent basis?

33%   Yes, I set aside money each month for retirement
52%   No, I’m not able to save for retirement
15%   Other

How much do you currently have saved for retirement?

47%   Less than $25,000
7%    $25,000 to $50,000
10%   $50,000 – $100,000
35%   Over $100,000

Do you have an emergency fund?

33%   I don’t have an emergency fund
10%   Emergency fund to cover 1 month of living expenses
20%   Emergency fund to cover 3 months of living expenses
37%   Emergency fund to cover 6 months of living expenses

Do you have a part-time or full-time job in addition to selling real estate?

78%   No, I’m a full-time real estate agent
10%   Yes, I have a part-time job
11%   Yes, I have a full-time job

Was your income higher in 2011 when compared to 2010?

39%   My income in 2011 is higher than 2010
21%   My income in 2011 is the same as 2010
40%   My income in 2011 is less than 2010

Do you feel as if you’re on track to reach your savings goal for retirement?

30%   Yes, I’m on track based on my age, current savings & future savings
57%   No, I don’t believe I have enough saved to meet future financial needs
13%   I don’t plan on retiring. I’ll be selling homes until I kick the bucket

These results are alarming.  We should be concerned about the future financial well being of those in the real estate industry. This survey reveals that many agents are headed for poverty.

Most work 10-15 hours a day, 7 days a week and most won’t have enough money to retire.

Of those surveyed, 87% plan to retire at some point in the future. However, 52% are notcurrently saving for retirement.  13% indicated that they would continue selling homes and didn’t plan to retire. This is fine; however, what happens if you are unable to work because of your health and don’t have any savings?

54% of those surveyed have less than $50,000 saved for retirement. The average age of those responding to the survey is 48 years old. Based on traditional retirement savings calculators, a 48 year old should have between $100,000 and $120,000 saved. This doesn’t seem to be the case for those in our industry. Most agents are way behind in their retirement savings. And even worse, 35% of those surveyed don’t have a retirement savings account in place.

One unusual finding was that 60% of those responding indicated their income was the same or better in 2011 when compared to 2010, but most agents still aren’t saving consistently. After reading the results of the first question, which revealed that 52% of agents aren’t saving on a consistent basis, I automatically assumed this was because our income levels in 2011 were lower than 2010. This is not the case for 60% of those surveyed.

These results are shocking, in and of themselves, but the scariest finding from the survey is that 43% of those surveyed are just ONE month away from financial disaster.

This can be seen in the responses to the question, “Do you have an emergency fund?” An emergency fund is a savings account that you can dip into, if you have a financial emergency, or don’t sell any homes and need some money to live on. Most financial planners recommend saving enough money in your emergency fund to cover 3 months of your total living expenses. This way you could live for 90 days without any income.

This recommendation is usually for folks who have full-time jobs. As real estate professionals who are paid commissions, we should have larger emergency funds because our income is more sporadic. To be safe, real estate agents should set aside at least 6 months of living expenses to protect themselves and their families.

One of the systems that I have set up as the owner and Broker of Record is financial training and budgeting for agents. Real estate is a business and should be treated as such. Knowing how to budget, when to spend money, understanding return on investment (your marketing and prospecting) is extremely important.

Let’s talk; I can help you plan your future.