Real Estate & Retirement: What I Now Know

September 16, 2016
By Joan B

Being part of the early wave of post-war baby boomers, I’m pondering the notion of retirement, and while I’m not interested in crossing that bridge any time soon (and may never be), I am interested in a financially secure future like my parents had into their nineties. So that leads me to the topic at hand: how to prepare for retirement, semi-retirement or a financially secure future at any life-stage if you haven’t already saved a bundle.

According to CNN Money, you’ll need 70% of your pre-retirement yearly salary to live comfortably into a ripe old age. That estimate might be fine and dandy if you do not have a mortgage coupled with ongoing home improvements/repairs, a host of hefty monthly bills (utilities, insurance premiums, etc.), and importantly, if you do not incur costly medical expenses as you age. However, if you do encounter age-related health problems, or if you do plan to travel, contribute to your grandchildrens’ college education, or go back to school for the sheer joy of learning, you may need 100% (or more) of your annual income!

So what are your options short of working till you drop? My husband and I chose to create passive income by investing, little by little, in real estate—specifically, rental properties that generate monthly income and help pave the path toward financial security. We dipped our toes in the water with one rental property, and our success with it gave us confidence (and extra income) to invest in additional properties that have required very little work and are managed by a property manager. As long as they are rented (not an issue in the Denver area right now!), the rental properties produce a generous monthly income.

Passive income is an invaluable tool in the retirement toolbox that yields higher returns than traditional investments such as the stock market, which only generates passive income when and if you happen to invest in a stock that produces a small dividend (and unfortunately most of mine don’t). I’m a proponent of a well-diversified portfolio of investments, and it just so happens that the investments with the highest rate of return happen to be real estate properties!

As I think back on a lifetime of trial-and-error investments, my only regret is that I did not invest more in real estate at a much earlier age. So if you are interested in producing passive income, why wait to consider real estate?

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