How Real Estate Investing Can Save Your Retirement
With the economy's growth slow and life expectancies growing longer each year, the retirement income crisis is unlikely to be solved with magic or voodoo accounting. Working Americans need viable solutions to the problem that don’t include the proverbial “working until you die.” Likewise, moving in with adult children or leaning entirely on state assistance are not attractive options, either. A quick look at the numbers reveals the breadth and depth of the problem. Men and women now live to be, on average, 77 years old. That means future retirees need to plan for roughly 20 years of retirement living, but of course that number may be much higher. In addition, perfect health is a rarity beyond a certain age. Retirement planning must also take into consideration the cost of doctor appointments, prescription medications and other health care services, which continue to rise precipitously in cost. But while life expectancy has steadily climbed higher, retirees’ savings account, 401ks and IRAs have undergone significant shrinkage. More than half of American workers now have less than $25,000 put away for retirement; 33% have nothing saved whatsoever. All of these numbers tell a devastating story— the coming waves of retirees will face dire circumstances or impossible choices, or both. In light of these dire predictions, there is a case to be made for investigating some nontraditional avenues of funding one’s retirement. For example, real estate investment— specifically rental properties—provides a practical and cost effective means to generate longterm, reliable revenue throughout one’s golden years. Whereas annuities and retirement accounts dwindle down to zero as retirees draw on them, rental properties continue producing steady returns year-in and year-out. In fact, their rate of return actually increases with time. While rents generally increase over time, the mortgage interest stays the same, and when a property is owned free and clear, the landlord can pocket most of the rental income. Similarly, investing in quality materials and performing regular maintenance can also increase the longevity and profitability of rental units. For many middle aged and older people, the idea of becoming a landlord can sound overwhelming. There are numerous hoops to jump through, such as learning the ins and outs of local ordinances, state and federal tax implications, and the finer points of tenant screening. Similarly, one has to learn how to compose a legally sound lease agreement. The services of an
accountant and an attorney can both be valuable in the early stages or setting up rental properties. Rest assured, however, that the Internet and the local library have a wealth of resources that can help new landlords understand their responsibilities. Not only does real estate investing provide a dependable income stream, it also offers a sense of empowerment and activity. Many retirees experience a sense of boredom or lack of purpose when their 9 to 5 comes to an end. Managing real estate, while not exactly grueling, does require some basic initiative and attention. Retirement is fading to a pipe dream for too many Americans. But with some startup capital, real estate investing offers an often lucrative and fulfilling way out of the retirement income crunch.