Prepare for "Returns for US Stocks ...to be Dismal" with Retirement Account Investing:- In the Money magazine Investment Guide 2013 issue, there was an excellent article by Penelope Wang about how to prepare financially if "The Long Term Returns for U.S. Stocks and Bonds Turn Out to be Dismal."  Double Digit ReturnsA superior way to do this is real estate investing that utilizes a retirement account, such as an individual retirement account (IRA).

Wang's Money magazine piece was not just based on unfounded hypothetical examples.  Rob Arnott, Chairman of Research Affiliates, stated in the article, that "Stock returns are likely to average 4% to 6%."  Mr. Arnott obviously performed a great deal of research before issuing such a bearish prediction for future stock returns in such a prominent financial publication like Money.

Returns that low, or even twice as high, can be topped by real estate investing.  There are many forms of high yield real estate investing that have turned in a performance over time that is far superior, including private mortgage notes, turnkey properties, small apartment buildings, flipping properties, and participating in foreclosures.  Done properly as a passive investor, all should far exceed the return for stocks projected by Arnott.

To enhance these returns from high yield real estate investing, the assets should be held in a retirement account.  

When any asset is part of a retirement account, there are no taxes.  If a small apartment building is in a retirement account, the rental income is tax free.  If a property if flipped for a profit, there are no taxes on the gains.  Already high, the returns from real estate become even better when there are no taxes due to the utilization of a retirement account.

What protects the long term returns for real estate is the risk management features of a retirement account.  For properties held in a retirement account, there cannot be a mortgage.  While no one buys real estate to be foreclosed upon, it does happen.  For millions, that was the case in The Great Recession.  The real estate that is part of a retirement account cannot have a mortgage attached, so there is no chance of it being lost in foreclosure.

Only time will tell if Rob Arnott is right in his prediction about "dismal" returns for stocks.  

But history has shown that real estate is the superior investment.  Over the last two hundred years, about 90% of the world's millionaires have been created by real estate investing.  With the tax free status from being in a retirement account, real estate should continue to outperform stocks in the future.