Retirement Planning: 3 Ways Real Estate Can Fund Retirement

real estate can fund retirement

Planning for retirement begins long before your last day of work. For decades you’ve earned money, saved money and invested money. Now the time has arrived to start cashing in and spending every day the way you want.

Unfortunately, many senior citizens aren’t financially ready to retire at 65 years old. That’s the general consensus at the Employee Benefits Research Institute. Over a third of people they’ve surveyed have less than $1,000 saved for retirement.

To retire couples at age 65 will need roughly $320,000 for healthcare costs alone. If you didn’t save 15% of your salary over the last 30 years chances are you won’t have enough money to retire comfortably. However, if you own a home there are ways to leverage your equity and fund retirement.

Reverse Mortgages


Reverse mortgages are a popular mortgage option where the bank pays you. That’s right – the bank will give you payments based on the home equity you’ve built.

For retirees, a reverse mortgage may be a better option than a home equity loan. With a home equity loan, you’ll get a lump sum, which you then have to pay back in monthly installments right away. Given the uncertainty of what’s down the road and reduced income, there’s a lot more risk involved with an equity loan.

A reverse mortgage is somewhat similar but there are important differences. For one, the retiree can choose to get a lump sum of money up front or withdraw from their equity credit line whenever needed. Also, the money received won’t have to be repaid until the home is sold or after the borrower passes away. You’ll only need to pay the annual taxes, insurance and maintenance expenses while you’re in the home.

This option is ideal for many seniors because they can stay in their home and still have enough money to live comfortably. The money you receive from a reverse mortgage can also help you delay filing for Social Security benefits. Each year you go without filing after age 62, your annual payout will increase by 8%. This can dramatically improve your income and financial stability.

Selling a Property Outright and Moving


Many soon-to-be retirees don’t like the idea of moving out of their current home. Moving is never an easy experience, and if you’ve made memories with your family in a home, it can be hard to let go. But many financial experts recommend that retirees consider the option.

Moving somewhere less expensive can boost your savings by netting a profit on the sale of your home even after you buy a new house. The cost of living could also be lower in a new location, helping you save even more every month.

One surprising trend that could be costing retirees is not downsizing the size of their home. A survey conducted by Age Wave and Merrill Lynch Wealth Management found that only 51% of retirees move into a smaller, more manageable home. And the majority of people say it’s the best home they’ve ever owned.

Selling your current home can be a nerve-racking thought, but the pain points that are felt today often turn into benefits tomorrow when you use your home to fund retirement. If you’re stressing about money all the time, you won’t feel comfortable and happy no matter where you live.

Renting Out Real Property


If you don’t like the idea of selling your family home just yet and have a nice nest egg, renting out your home could be a viable alternative. You can rent out your home and move into a more affordable rental so the month-to-month expenses are reduced.

Just keep in mind the rent for your home will need to cover the monthly insurance, annual taxes and the cost of your new rental property in order to make financial sense. This is often easy to achieve because many retirees are empty nesters that don’t need much space. If you move to a city with lower living expenses, it’s even easier to find more affordable housing.

KEEP IN MIND: You’ll also have to count the monthly rent as income on your taxes, which could increase the amount you owe.

Using your home as a financial tool involves a lot more than dollars and cents. Unlike stocks and bonds, emotions and memories are connected to the house you’ve lived in. It’s important to remember that a home is an important tool for retirement planning since it’s the most valuable asset you own. Real estate can fund retirement.

Photo courtesy of: paulbr75

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Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at or follow her on Twitter @shoeaholicnomor.

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