The Hard Way

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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