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Unlocking Real Estate Opportunities for Union Pacific Employees: A Guide to Building Wealth in Retirement

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If you are a Union Pacific employee looking to buy real estate as a part of your retirement planning, then you should know that such an approach has its advantages and disadvantages,' says Michael Corgiat of The Retirement Group, a division of Wealth Enhancement Group.

Brent Wolf from The Retirement Group, a division of Wealth Enhancement Group advises Union Pacific employees who want to diversify their retirement portfolio with real estate to focus on due diligence and the local market dynamics.

In this article, we will discuss:

1. Diverse Retirement Investment Strategies: We compare the conventional stock market investments with the real estate options for retirees and emphasize the tangible benefits and the stability that comes with real estate.
2. Challenges and Benefits of Real Estate Investment for Retirement: We explore the possible drawbacks, such as problem tenants and repair costs, against the background of healthy rental yields and tax advantages.
3. Real Estate Retirement Stories: Real tales from four people over the age of 65 who have invested heavily in real estate, including their stories, approaches, and results.
While on Wall Street, many people save for their retirement, some of the Union Pacific employees may decide to own real estate, which is a more tangible asset, with a better curb appeal. Having kitchens, doors, and walls around their nest egg makes retirees more comfortable. These retirement investors like the property rental income and the tax benefits that come with being a landlord even though many still rely on the stock market to fund their retirement. Some of them also derive joy from the process of property rehabilitation.

The Boston College's Center for Retirement Research, in its analysis of Federal Reserve data, reported that in 2022, 10% of American homes belonged to an individual 65 years of age or older who received rental income, while just 7% of households with an individual under 65 years of age did the same. Managing properties is a job during retirement. Tenants may not pay or may cause damage, units may stay vacant, and repairs may be immediate. In addition, the costs of property ownership such as insurance and property taxes are also rising.

Union Pacific employees should take these into consideration when investing in real estate. Though there are such problems, there are still many retirees who believe that the advantages are greater than the disadvantages. Due to the years of increasing property values and relatively low mortgage rates, a large number of people are retiring on real estate today.

These four real estate retirees share their experiences, the expenses, the worries, and the pleasures of living off a portfolio of properties.

Josh Bottfeld: San Diego, California.

Properties: 7. Mortgage Debt: $1 million. Annual Spending: $120,000. Josh Bottfeld bought a San Diego studio apartment in 1982 using money he had taken out of his retirement account. At 29, he thought that this would provide retirement money from a portfolio. Several years later, he sold the studio and used the proceeds to buy a house in San Francisco, which he and a friend later sold for $125,000 after purchasing for $103,000.

From these earnings, a three-family home in a gentrifying neighborhood was purchased. By the year 2000, Bottfeld owned fifteen properties in Portland, Oregon, Las Vegas, and San Francisco. He was also able to take advantage of a tax loophole that deferred capital gains taxes while investing in another piece of real estate. In 1997, Bottfeld left his job in human resources to become a realtor.

In 2004, he moved to San Diego to run a real estate company and at 53 he retired after retiring from working and from investments and rentals. During the financial crisis, there was a need to return to work for a short time but in 2012, he retired for good. According to Bottfeld, real estate is a good inflation protector and therefore investment in it is better than in equities. He and his spouse, Brent Butler, currently own three rentals in a San Diego home and 14 units in seven buildings. Property managers receive between 6-10% of the rent to take care of the repair and tenant issues.

He has controlled his expenses, but his house equity is only $8 million after mortgages. His four properties are mortgaged and his fixed interest rates are about 3.5%. He has $4.8 million in equities and other interests including bridge loans that pay 8% to 15% to house flippers. He receives about $20,000 a month in rent, $8,000 a month in bridge loans, and $3,200 in Social Security. His lifestyle includes a Danube River cruise this summer at $10,000 per month in expenses.

Sarah McLane: Stowe, Vermont, and Nantucket, Massachusetts.

Properties: 2. Mortgage Debt: $0. Annual Spending: $100,000. Sarah McLane instead chose to build her fortune for retirement in historic homes in Nantucket and Stowe, Vermont while working on Wall Street. She quit her job in financial services in 2017 to become a builder in Vermont and stopped tracking the stock market. Instead, she focused on real estate, which she knew and could improve.

When McLane withdrew most of her $250,000 retirement funds in 2007 to use as a down payment and remodel an 1813 farmhouse in Stowe, she began her real estate career. She used the money for her house rather than withdraw it from her retirement account and pay the 10% early withdrawal penalty though she had to pay income tax on it. The Stowe property is worth $3 million and was purchased by McLane for $2 million. Her passion for establishing a permanent presence in an area she believes her kids would love drove her to peel off wallpaper and finish wood floors while spending her weekends. In 2018, she spent $1.6 million to purchase a historic Nantucket home and $2.5 million to renovate it to rent it out.

To rent out the Nantucket house during the busiest travel season, she intends to live in Vermont for the summer. She expects to generate $250,000 per year, which will be more than enough to cover her $100,000 in expenses. She also holds $1.3 million in bank accounts with 6% interest. During the winter, McLane plans to rent out her Stowe home and use the rental income to maintain it. She intends to live in Nantucket from fall to spring, claiming that it is the perfect place to retire and that he plans to live there. The house is ideal for her future as it is close to Boston and her grandson and has facilities nearby.

Augusta, Georgia / Bryan Haltermann.

Properties: 12 Mortgage Debt: $2 million Annual Spending: $150,000 Even two years after retiring, Haltermann still goes to the office every day to check on his holdings. The former developer of commercial real estate enjoys walking around his properties and talking to his four employees who manage his properties and responding to emails. Playing tennis on the court and having lunch with friends are his slow pace example. Four decades ago, Haltermann's business started when it paid approximately $50,000 for a 10,000 square foot facility that is currently valued at $500,000.

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He was well versed in historic properties and was able to restore them with significant tax benefits. He bought out his company partner about 15 years ago. After retirement, he invested the $5 million profit from the sale of ten buildings for about $10 million. An additional $5 million represents the value of his remaining rents, house, and vacation property, along with $2 million in low-rate mortgages. His insurance, taxes, and mortgage are all paid for by rental income.

He and his spouse, Alicia, are primarily spending on travel and are spending $150,000 a year, or $50,000 more than they did before retirement. Italy and Spain have been their recent favorite travel destinations. Due to the rising costs and interest rates, Haltermann has no plan to purchase any other real estate.

David Zach: California, Sierra Madre.

Properties: 4 Mortgage Debt: $850,000 Annual Spending: $66,000 David Zach didn't see the need for any other investments and put all of his retirement money into real estate. He preferred tangible and touchable assets. The majority of his assets are held by Zach, who is 63, and they are mostly centered on three lots in Sierra Madre: his house, a rental property nearby, and an auxiliary dwelling unit (ADU) that is currently being constructed. His current rents yield about $7,000 per month, and once the new ADU is finished, he expects to receive an additional $2,000. He is happy with his real estate investment of homes worth approximately $3.3 million and $850,000 low-rate mortgages.

Working about ten hours a month, he sells shower parts through his business and earns $84,000 a year. He spends about $5,500 a month on food, property taxes, and mortgage payments. He has invested all of his money in housing, and he has learned from the experiences. He lost a property to foreclosure 16 years ago, and he incurred $300,000 in losses.

He has kept a lean real estate portfolio, given that labor shortages and inflation have increased the cost of building an ADU to $100,000. Recently, when construction expense overruns forced him to preserve his older cars instead of ordering a new one. His two adult children will help to finance his retirement and inherit his rental properties. In his words, 'buy the worst property in the nicest neighborhood that you can afford.'

These anecdotes demonstrate that although investing in real estate is a work and risk that can produce a steady stream of income in retirement for Union Pacific employees. Every investor's journey is unique and reflects that of his or her circumstances and preferences in the path towards retirement financial security and satisfaction. Real estate investments for retirement offer Union Pacific retirees substantial tax benefits in addition to stable rental income.

The IRS explains that owners of rental properties may be able to lower their overall tax burden by claiming expenses such as property taxes, mortgage interest, depreciation, and repairs on their taxable income (IRS, 2023). This can be particularly helpful for people trying to reduce their tax liabilities and therefore increase their retirement wealth because it can generate a steadier and more reliable source of retirement income.

References:

1. Dalton, Michael J. Retirement Planning and Employee Benefits. 20th ed., Money Education, 2025. UCLA Extension. www.uclaextension.edu .

2. 'Real Estate Investing for Beginners: 5 Skills of Successful Investors.' Harvard Division of Continuing Education, 2023. professional.dce.harvard.edu.

3. 'Why ASPPA Number So Low and 2012 Budget Number So High?' Center for Retirement Research at Boston College, 2023. crr.bc.edu.

4. 'Retirement Planning Today.' Virginia Commonwealth University, School of Business, 2023. business.vcu.edu.

5. Grainger, Lauren. 'Retirement Planning Today Course Details.' Virginia Commonwealth University, 2023. connect.business.vcu.edu.

What are the specific eligibility requirements for employees of Union Pacific Corporation to participate in the pension plan, and how might these requirements evolve as IRS regulations change? Understanding how Union Pacific Corporation aligns its eligibility criteria with broader IRS regulations can help employees assess their own eligibility for the pension plan, particularly in light of any new IRS guidelines issued for 2024.

Eligibility Requirements for Pension Plan Participation: Eligibility to participate in the Union Pacific Corporation pension plan is governed by specific criteria set forth in the plan documents. As of January 1, 2018, the plan was closed to new participants, meaning individuals hired on or after this date are not eligible. For existing employees, eligibility to accrue benefits continued provided they were active participants as of December 31, 2017, and remained in covered employment. Changes in IRS regulations could potentially alter these eligibility criteria by requiring adjustments to maintain compliance with legal standards, potentially affecting who can accrue benefits in the future.

How does Union Pacific Corporation calculate an employee's final average compensation for pension benefits? Given the potential for changes in compensation structures, it is essential for employees at Union Pacific Corporation to comprehend how their average compensation is determined and how this figure might impact their retirement planning.

Calculation of Final Average Compensation: The pension plan calculates an employee's final average compensation based on the average monthly compensation over the 36-consecutive month period out of the last 120 months of active participation that yields the highest average. This includes base pay, overtime, and certain incentive and bonus payments. Understanding this calculation is crucial for employees to appreciate how raises, bonuses, and other compensation changes might impact their pension benefits.

What forms of payment options are available to employees of Union Pacific Corporation when they choose to retire, and how do these options influence the total benefit received? Employees need detailed information on the different payment structures to make informed decisions that suit their financial needs in retirement.

Payment Options Available at Retirement: Union Pacific offers various payment options for pension benefits upon retirement. Employees can choose a lifetime annuity or opt for joint and survivor annuities, providing continued benefits to a designated beneficiary. Other options include certain annuities that guarantee payments for a set period, regardless of the employee's lifespan. These choices allow employees to tailor retirement benefits to their financial needs and family circumstances.

In what ways does Union Pacific Corporation integrate Social Security and Railroad Retirement benefits into the pension plan, and how does this integration affect the overall retirement income for employees? Employees should explore the implications of these benefits on their pensions to develop a comprehensive retirement income strategy.

Integration of Social Security and Railroad Retirement Benefits: The pension benefits are coordinated with Social Security or Railroad Retirement benefits through an offset formula in the pension plan. This integration reduces the pension benefit by a portion of the government retirement benefits projected at the time of retirement, reflecting that some of the funding for these benefits comes from Union Pacific. Employees need to understand how this interaction affects their total retirement income to plan effectively.

What strategies can employees of Union Pacific Corporation employ to maximize their pension benefits prior to retirement while adhering to IRS limits? Employees must be informed of practical steps they can take to enhance their benefits within the framework established by IRS guidelines.

Maximizing Pension Benefits: To maximize pension benefits under the IRS limits, Union Pacific employees can ensure they maximize their earnings during the final average compensation period, continue employment as long as possible to increase credited service, and make strategic decisions about retirement age and benefit commencement. Understanding the interplay of these factors with IRS contribution and benefit limits is essential for optimizing pension payouts.

How does the vesting schedule work within Union Pacific Corporation's pension plan, and what implications does this have for employees who leave the company before full vesting? An understanding of the vesting schedule is crucial for employees at Union Pacific Corporation to grasp the long-term benefits they might forfeit by leaving before they are fully vested.

Vesting Schedule: The vesting schedule is crucial as it determines an employee's entitlement to pension benefits upon leaving the company before retirement age. Union Pacific's plan requires employees to complete five years of vesting service to qualify for a vested benefit, which is payable as early as age 55. Employees considering leaving Union Pacific should be aware of how their vesting status might affect their pension entitlements.

What responsibilities do employees have to keep Union Pacific Corporation informed about their earnings records, particularly when claims for benefits arise, and what might happen if these records are not accurately reported? Employees should be aware of their duties to maintain their benefits and the potential consequences of noncompliance within the pension plan.

Responsibilities for Reporting Earnings: Employees are responsible for ensuring that Union Pacific has accurate records of their earnings to calculate pension benefits accurately. Failure to report or correct discrepancies in earnings records can lead to miscalculations in pension benefits, affecting retirement income. It's vital for employees to regularly review their earnings records and report any inaccuracies.

How does Union Pacific Corporation ensure compliance with ERISA regulations as they relate to employee retirement benefits, and what rights do employees have under these regulations? Employees of Union Pacific Corporation should familiarize themselves with their rights under ERISA to ensure they are adequately protected when claiming pension benefits.

Compliance with ERISA Regulations: Union Pacific ensures compliance with the Employee Retirement Income Security Act (ERISA) regulations, which protect employees' rights to their pension benefits. Employees have specific rights under these regulations, including the right to receive information about their pension plan, appeal denials of benefits, and sue for benefits or breaches of fiduciary duty. Awareness of these rights is important for employees to safeguard their benefits.

What happens to the pension benefits of employees of Union Pacific Corporation in the event of a company merger or acquisition, and how can employees prepare for these changes? Understanding the potential impacts of organizational changes on their pension benefits can enable employees to safeguard their retirement plans.

Impact of Company Mergers or Acquisitions: In the event of a merger or acquisition, employees' pension benefits could be affected. Union Pacific's pension plan provisions include terms for handling benefits under such circumstances. Employees should be proactive in understanding how these corporate changes might impact their pension benefits and seek clarity on their rights and options.

How can employees of Union Pacific Corporation contact the Benefits Group to inquire further about the pension plan and related questions? Clear guidance on contacting the Benefits Group will assist employees in accessing the information necessary to navigate their retirement options effectively.

Contacting the Benefits Group: Employees with questions or who need assistance regarding their pension plan can contact Union Pacific's Benefits Group. Having the contact information handy ensures that employees can promptly address concerns or seek guidance about their retirement benefits, aiding in effective retirement planning.