Does Property Investment Make Good Sense for Your Retirement?



Preparing for retirement is a task many UK workers don’t relish. Though universal pension age is established by the government, many other aspects of retirement are up in the air. Each person’s retirement experience is unique, so these are only a few of the questions needing answers, as you approach you final days on the job.

  • When should you step away from your job?
  • How much money do you need to put by, in order to maintain your lifestyle after leaving your working life behind?
  • What are the best types of investments to ensure your financial needs are accounted for, during retirement?

From state and work pensions to private investments made on your own, you have several options to choose from, establishing an income stream to fund your financial needs. In practice, most UK pensioners draw from multiple income sources after leaving the workforce. Among the many money-makers available to retired workers, investing in property is one way aging Britons make ends meet whilst retired.

Whether you’re considering a property investment or simply in the process of making accommodations for your retirement pot, consider the following concerns, associated with property investments.

Longer Lifespans Spark Added Need for Retirement Investments

Medical advancements, public health awareness, and other factors have extended British lifespans. People live longer now than they did at the turn of the century, with the life expectancy for males in England having risen to 79.6 and the expected lifespan of women in England climbing to 83.2 years of age.

Whether or not you beat these odds, it’s clear you have a good chance of surviving beyond retirement age, so you’ll need money to live off after leaving your job for good. While you’re employed, payday loans can help you bridge spending gaps, when fast cash is needed. But after leaving the workforce, your options may be limited.

According to Help Me to Save blogger, Karen Bryan, retirement planning has evolved over time. Where pensions were once considered the top method for funding retirement, seniors living longer and other factors have sparked a trend toward property investment, which may be more profitable than some of the traditional funding sources used during retirement.

Though house prices have deteriorated in some areas, Bryan asserts buy-to-let arrangements may still outperform pensions in terms of long-term growth and returns during retirement. Drawn by the appreciating house prices seen in recent decades, many investors have diversified into property holdings, including first-time investors hoping to take advantage of property opportunities. At the same time, media reports warning of a bursting property bubble show signs of proving true, particularly in London, where house prices have in recent times slipped at the fastest rate seen since 2009.

Further Considerations

Investment property has the potential to deliver dual returns. Not only do investors enjoy rental yields, but owners also benefit from capital appreciation, as values rise. Given the upward trend experienced over the course of the past 20 or 30 years, property investments clearly outperformed most pensions during the period. But it’s important to recognise the two investment types fall into entirely different classes, and may not appeal to the same kinds of investors.

Pensions are passive investments, yielding returns without much active participation from elderly beneficiaries. Buy-to-let schemes, on the other hand, are active investments, requiring ongoing attention from property owners. Therefore, it’s up to each investor to weigh the conditions of various investments, in order to create the best possible lifestyle match. You can always hire a management company to administer your property, but paying for services diminishes your expected rental earning potential.

As UK retirement planning evolves, property investments stand out as a potentially lucrative supplemental income source for seniors. Paired with your pension, the alternative may supply access to retirement resources, provided your lifestyle is a good match for ownership obligations.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

Leave a Comment

Your email address will not be published. Required fields are marked *