Retiring might be an exciting milestone, however, it can be a scary thing at the same time. And even if you can set aside a good amount of money in your 401K annually, it’s normal to get worried about inflation that might eat away at the worth of your portfolio. So, to lower the chances of that happening, you should make an effort to boost your retirement income.
An excellent way to grow your nest egg is by investing in real estate. Besides, real estate has the potential to open up a realm of wealth-building chances, for long-term benefits. So, it doesn’t matter if you want to invest in a property or buy your own home, real estate can get you forward financially. Here are some reasons why investing in real estate can help boost your retirement income:
People will always need a place to live; therefore, giving them one will make sure that you have the potential to get rent money to boost your retirement income every month. That said, there are various options to consider when it comes to getting rental income. You can choose to rent a part of your home if it is suitable. For instance, if you have a renovated garage or unfinished basement, accommodating a tenant can be more than reasonable.
Additionally, if your home will be fully paid for by the time you retire; you can use the money on property taxes and maintenance and still be left with enough money to spend on other bills. A good way to make sure that you get the most out of your rental property is by hiring a reputable property management company.
There is a good possibility that you will have enough equity in your home if it won’t be fully paid off by the time you retire. This will then give you the liberty to borrow against the property if you need extra income, whether through a line of credit or home equity.
Additionally, there is another way to cash in extra income on the equity you have in your home. For instance, you can consider selling your property and save the money that results. Selling your home can be the best plan if you want to downsize your home or you want to move to a different neighborhood or metropolitan area where there is affordable housing.
Real Estate Investment Trust (REITs) income
These are like mutual funds that have commercial, industrial, and residential properties. REITs pass to your rental income, profits from sold properties, or payments received on credits in mortgage-backed securities. REITs can also generate capital profits through fixed dividend income. The benefit of investing in REITs is that it enables you to invest in real estate without necessarily having to own another home or building.
Investing in real estate is the best way to grow your nest egg mainly because the government supports it with tax benefits. There is a big tax incentive in everything about real estate, from rental properties, vacant lands, apartments, commercial and industrial buildings to shopping centers. That said, owning real estate can generate a considerable amount in tax savings including tax sheltering.
Some of the common real estate tax benefits include:
– Capital gains
– Pass-through deductions and passive income
– 1031 exchange
– Self-employment tax
– Tax-deferred retirement accounts
– Opportunity zones
Additionally, tax breaks are one of the biggest benefits of investing in real estate. Unfortunately, many people don’t know that and fail to take advantage of it. So, take your time and understand the type of real estate tax benefits at your disposal.
Also, take advantage of the benefits and make sure that you are on course to financial freedom while at the same time safeguarding yourself from avoidable charges.
While you might have a great retirement plan, sometimes that time of your life can be more expensive than expected. There will be rising healthcare expenses as well as other expenditures that can throw your financial plan off track.
Therefore, if your objective is to guarantee a strong retirement stream of income, consider investing in real estate.