How To Use Property Investment For A Comfortable Retirement

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Last Modified: 13/10/15

In simple words, property investment refers to investing in home properties (real estate). This method of investing has become much more popular during recent years because of the great investment opportunities it holds, and because it is a great way to accumulate savings and extra income. The price of real estate is constantly fluctuating, and properties that are on the rise can earn an investor a lot of extra money that can be saved and then used down the road.

How does property investment work?

At first, an investor will buy a property and then will allow someone to rent it (commonly referred to as a tenant). The person who owns the property is known as the landlord, and they will normally charge the tenant whatever amount of money will allow them to cover all of the mortgage costs, taxes, and other costs that it takes to maintain the property.

Landlords can profit from this in a number of ways. Some make extra money by charging a small amount more for monthly rent, which allows them to profit frequently while the tenant is living on the property. Another way the profit, but which requires more patience, is waiting until the mortgage has been paid off. At this time, the majority of rent will become profit, and there is also a chance that the property will have increased in value, meaning a great deal of profit.

Investing in real estate can sometimes cause problems and more harm than good, however, if you put in the time and effort that it requires, then you will be successful and can find yourself putting a lot of money in your pocket for down the road.

How much time and effort does property investment require?

There are different kinds of investments and the time it takes to properly invest in them varies. For example, investing in a stock is very simple and doesn’t require nearly as much attention as property investment. The stock sits in your brokerage account and, if you’re lucky enough or have enough knowledge of the stock market, it will increase in value. Investing in a rental property is much different; you will need to put a great deal of time and effort into maintaining the home, making sure that the tenants take care of it and avoid any property damages, etc. This can be a very demanding investment and is definitely not recommended for everyone, however the benefits to getting involved in property investment are definitely leaning in its favor.

How can property investment help you when you retire?

Anything that helps you invest your money and accumulate more will aid you when you finally settle down for retirement. It is definitely ideal that you retire with sufficient funds to enjoy the last years of your life and live comfortably. Having a good amount of funds will allow you to travel, treat your children and grandchildren, and whatever else you feel like doing. Even if you are just going to relax after retirement, it is definitely important to have enough money, and investing is something that a great deal of people do throughout their working years so that they can have this benefit once they retire.
Using property investment for retirement has become a more common method of investing and more people than ever are retiring from their careers with a great deal of savings in their banks.

It has been proven that rental properties can allow a person to accumulate around $200 to $1,000 per month in savings, depending on the property and its location. It is essential for a property to have a good location, and this amount can also go up if the property increases in value. If a person invests in a property at the time their 30 years old, then this means around $72,000 (at the least) in retirement savings by the time that person is 60 years old. Adding this money into an RRSP will mean even more savings!

People can even continue to invest in a property after they are retired. This means they will have a steady flow of money coming into them each month, giving a sense of security. This is an amazing opportunity for those individuals who don’t mind putting a bit of focus and care into maintaining the property, even once they have retired from their job or career.

What do the experts have to say?

Andrew McLean, author of the two books Making Money in Foreclosures and Investing in Real Estate, is also a landlord with a great deal of experience in property investments. He had provided the world with invaluable advice and has quite a few positive things to say about investing in properties:

“Rents are always going to go up; the value of your property is almost always going to go up and most of your costs are going to stay the same, particularly if you assume a fixed mortgage rate.”
“Eventually, even if you’re only making a little in the beginning, you will watch your income climb over the years.”

This is an amazing opportunity and using property investment for retirement is definitely a great option for anyone who is looking to invest in something that will provide them with extra income and savings. If the property is in a good location and they make sure that the tenant is responsible, this is a great way to accumulate money over the years and make a great amount of savings for retirement. Living comfortably after retirement is very important and is something to think about during your working years. It is definitely something to consider and to find out more about. It might provide you with a couple vacations or the chance to pay for your grandchildren’s education years down the road. Investing in a property can also continue after retirement and will provide the individual with a steady income that they can rely on. Although there are some risks (such as not picking a good property or having an irresponsible tenant), with a little bit of work and effort, property investment can be a highly useful tool for you to build your savings through the years.

Frequently Asked Questions About Retirement

We live in a time and age where working has taken a different turn. Most people opt to retire early. In the current generation, retirement is no longer about age but it involves having ones budget and liabilities on hold, understanding what resources one has and how to manage them. Here are answers to some of the frequently asked questions about retirement.

1. How much super do I need to retire?

Make sure you can afford. Retire when you are emotionally fit to quit your jobs, when you feel the need to be your own boss and being in control, when you have health complications, you are financially stable and when you age.

2. How much should I save to retire?

The amount of money you need to have depends on the age that you want to retire at. This is made possible through the use of a calculator. The calculator takes into consideration various factors including: One’s current age, Retirement age, The investment pattern whether it is low, risk or high risk, Life expectancy, estimated average inflation rate, returns from investments and portfolio size. It however does not include securities held. A retirement calculator or a financial adviser will help you calculate this.

3. When should I start saving for retirement?

Start saving upon realization that you need to retire early. Keep saving having in mind that saving rewards. It doesn’t mean that you have to start big to save, start small increasing the savings with time. Come up with a saving strategy and stick to it having set goals. Analyze your retirement needs and the estimated amount. One needs a minimum of 70% of the pre-retirement earnings for the lower earners while 90% or more is required once one stops working to maintain living standards.

4. How do I start saving for my retirement?

Contributing to one’s employer savings plan is a noble idea which would mean lower taxes. Learn about your employer’s pension plan and inquire whether you are covered by it or not. Request an individual statement to analyze the benefits you will gain. You can also find out whether you are included in your spouse’s savings plan. Factors such as Inflation and investment type play a role in determining the savings at retirement. All this is aimed at reducing risks and improving returns. A good saving plan entails restricting from using the money otherwise one bears the risk of penalties or losing tax benefits. In case one needs to change the job one can roll the savings over to the new employers saving plan or invest in an Individual Retirement Plan (IRA)-either traditional IRA or Roth IRA, which provides better tax advantages.

5. How much do I need to save so I can retire financially secure?

How much money one should be saving depends on their paycheck. This is better done by analyzing ones expenditure and allocating a certain percentage for saving every month. A rough estimate of 15% of the gross earning is advised to be allocated to retirement for a good retirement scheme. If you are not saving, you can opt to contribute to your employers saving scheme then develop a personal plan later. The use of a retirement fund is another option. Getting a financial planner will help you budget and know the savings. Savings should especially be done during early years to see higher savings.

6. What is the Age Pension and how do I apply for it?

Social security is a system or the Age Pension, that offers pay out if you invested in it while working. It works by using money paid via tax deductions and sending it out to those enrolled. You can apply for Social Security retirement benefits around the age of 62 years and 72 years. However it only works if you have reached the retirement age which depends on the year of birth. Applications can be made through the phone or the Social Security Offices.

7. What are the advantages of the Age Pension?

In Australia the present situation exists to support people from their retirement age, via the Age Pension. The advantages of this are The purpose of any retirement plan is to provide income after retirement. An employer can offer his/her employees a supplement pension that serves as a token of appreciation thus improving the business by attracting and keeping competent employees.

8. When do I receive the benefits of Social Security?

You can access the retirement benefits in case need arises mostly from as early as 62 but the total amount one will receive at the end will be less than the expected amount. For example , If your retirement age is 66-the reduction age at 62 years is 25% and at 64 it is about 13.3% this shows a decreased rate as one nears their retirement age.

9. What are the types of retirement plans available?

Two main categories are: Defined contribution and Defined benefit

Defined contribution plan-It entails an allocation formula that specifies a certain percentage of compensation to be contributed by a participant by allocating a certain percentage of their salary before taxation and allocating it to the retirement plan.

Defined benefit plan-It allocates a preferred level of benefits to be paid on retirement. It uses a fixed monthly payment or a percentage of compensation; the employer then contributes to this plan yearly ensuring the benefits are always available upon need. Annual contributions depend on factors like salary, age, interest rates and inflation rates.

10. Which is the best retirement plan?

You should opt for a plan that provides lower taxes and higher income. An eligible candidate can have a traditional IRA(Individual Retirement Account) and a Roth IRA. The choice depends on:

Investment choices available-Large companies and corporations limit their investments choices to bonds and mutual funds which also applies to smaller companies but the difference is that they give more options to choose from.

Investment charges: the fees charged to the investment plan

Client’s accessibility-A good retirement plan puts into consideration the need to access the savings before the expected time. Individual Retirement Account can be accessed any time however the amount withdrawn cannot be paid back to the IRA.

Availability and Professional Investment Management Cost-A client who is unable to properly device an investment plan should consider services offered by a professional.

Other factors to consider include: Age and retirement pattern, the purpose of funding the retirement account among others.