According to Statista, the number of retirees relying on Social Security benefits has increased exponentially in recent years, amounting to almost 47.3 million people in 2021. Regarding expenses, statistics show that the average retiree needs to set aside a lump sum of $4,300 annually for healthcare costs alone. These payments for health services can quickly become the most costly bill each year. It shows a pressing need to invest in retirement plans that can provide retirees with financial security and build wealth over time.
But most Americans may fail to plan for retirement because most working-age households do not take advantage of long-term savings plans and investments. Although the traditional IRA is the most common retirement plan, it doesn’t ensure financial security because of the stock market’s volatility.
One often overlooked source of income for retirement is investing in real estate. This investment involves buying and selling land and buildings, including apartments and homes. It promises a build-up of equity, long-term gains in value, and a steady income stream from rental payouts. Moreover, it has several advantages over other retirement plans because, unlike stocks, bonds, mutual funds, or IRAs, real estate investments are not subject to the same risk of market fluctuations that can erode your savings.
The following are some of the major reasons for investing in real estate for retirement:
Create a consistent income stream.
Real estate investments provide a consistent flow of money from rental payments, which can go towards supplementing your retirement income. Additionally, real estate can generate passive income without you actively needing to manage the property; someone else could do it for you. For this reason, finding trustworthy tenants and ensuring the property is well-kept are essential to maintaining a good investment.
Your income keeps pace with inflation.
One of the biggest rewards of investing in real estate is that it tends to keep up with inflation over time. A rising price of goods and services is called inflation, which occurs over time, thus reducing the buying power of a dollar. With real estate investments, you can benefit from inflation because raising the rent yearly can keep up with increasing costs. Moreover, as property values increase due to inflation, so does your net worth.
As some say, put all your eggs in different baskets. Investing in real estate provides greater diversification for your portfolio by spreading the risk across multiple asset classes. Diversification means investments in different asset classes can increase your chances of higher returns. With rental properties, you have more control over your investment and can take advantage of long-term gains. Real estate is known for its liquidity, making it easier to convert into cash if needed.
Real estate investment can be an effective means to supplement retirement income. It can bring in more returns over time, and it is a safe option for building wealth due to its steady flow of income, ability to keep up with inflation, and portfolio diversification. With proper planning and some research, investing in real estate could prove beneficial for your financial future.