For millennials, preparing for retirement is still theoretical, but right now “baby boomers” (Americans born between 1946 and 1964) are entering their retirement years at a rate of 10,000 per day. Adjusting to their new reality means many boomers are looking for alternate sources of investment to pad their retirement savings (or fund it completely).
Unfortunately, the retirement funds of many boomers are either minimal or nonexistent. The statistics are somewhat grim: 41% of baby boomers between the ages of 55 and 64 have no retirement savings at all, and 25% have saved less than $50,000.
When you consider the possible length of retirement (20 years or longer), a yearly average income based on these figures is nowhere near a livable amount.
Real estate investments have become an attractive option for many baby boomers who want to:
The Entrust Group oversees self-directed IRAs. These individual retirement accounts allow for non-standard investments, including real estate. Among real estate investment options, single-family homes are the most common choice for retirees. The Entrust Group has shared that over 50% of their clients who’ve made real estate investments purchased single-family homes, while over 25% bought multi-family homes, and a remaining 20% purchased land.
Of course, investing in real estate is not without its potential pitfalls.
Purchasing an investment home may be more difficult for boomers who have already retired. Buying a home requires planning ahead, and qualifying for a mortgage generally involves being currently employed—meaning it’s best to purchase before retiring, not after.
However, it is possible to purchase a home once you’ve already retired, as long as you can provide proof (based on your current income) that you can make mortgage payments.
Collecting rent every month provides a solid, tangible, and steady profit that retirees can rely on. Perhaps the biggest benefit to owning an investment home is that as long as it is well-maintained, it will increase in value over time. Approached carefully, these investments are a good way to prepare for the future.
Real estate is proving to be a viable option for baby boomers to enhance their retirement funds, and it is an important alternative for future retirees to consider.