Is Rental Property a Good Retirement Investment?
While most look forward to a retirement, not all receive a pension and/or may not have enough savings to live on for an extended period of time. Although the thought of retirement funds and plans may seem daunting, the importance of ensuring financial stability during your retirement cannot be understated.
For those without pension plans, carefully planned financial management of a rental property can be a sound investment strategy to carry you through your retirement.
Letting out property is likely to offer financial returns that outperform the average pension. However, you must take care to note of changes in taxation and stamp duty and ensure you are well-advised about your tax responsibilities.
Although the returns on initial investment in property are often significantly higher than the average pension, using property for retirement of course comes with higher risks, and can incur more taxation – pensions are a much more tax efficient method of saving for retirement. But, lower taxing and minimized risks with pension plans generate much lower returns. The average pension savings in the UK are around £50,000, meaning for a person retiring at a normal age, the payout would be just over £200 per month.
The benefit of owning property is that you can cash in at any time without incurring early withdrawal charges, and, if you decide to let out your property, you will ensure a monthly net rental income. Indeed, if you feel you have enough saved and enough money coming in from monthly rent payments, you are at your liberty to “retire” whenever you choose, as opposed to pensions which require you to wait until the required age to access your savings.
Of course, things do not always go exactly to plan – divorces, deaths, and fluctuations in the housing market; these changes in circumstance can possibly derail retirement plans that are wound up with owning property. However, there are no guarantees with pension plans either. Companies go out of business and people make bad investments all the time – either of these could wipe out workplace pensions or personal savings at any time.
Although there cannot be guarantees, letting out property will often at least cover its own mortgage payments, and the property’s capital growth with likely outperform most pensions.
At Etimon, we recommend property investment as an excellent wait to diversify if you’re having any doubts about the future of your pension and retirement savings.
As always, it is important to take all significant financial decisions carefully, with good advice from trusted sources. At Etimon, our priority is your peace of mind. We highly suggest either supplementing pension savings with renting out property or investing in multiple properties in varying locations in order to spread any risk involved.
If you’re interested in protecting your retirement, speak to one of our friendly knowledgeable staff – we can help you with a range of services, from estate agency to property management and property investment to commercial letting.