Often, we hear people ask, “Should I save for retirement or buy a house?” Actually, that question assumes that this is a scenario where you can only do one and not both. Have you considered that purchasing a home could actually help you save for retirement? Here are some reasons why a home is a good investment for your future.
Purchasing a Home Can Assist With Retirement Planning
- Savings as equity. The money you put into your home is a form of savings. It may not be liquid, but it is tangible, and it will be part of your retirement wealth.
- No more rent. This is a big deal. Renters may be able to invest more in the stock market, which can help them save for retirement, but they are also throwing money down a black hole. Think how much that adds up to over a lifetime. Let’s say your rent is $1,000 a month. Over the course of 30 years, that adds up to $360,000. Just by not paying rent, you would have saved $360,000 toward your retirement over that timeframe!
- Your home may increase in value. If you sell it later, the value that the house has gained will become liquid savings for your retirement.
- You can rent out space to others. If you need an easy source of passive income during your retirement, owning your own home gives you the option of taking in tenants. While this is not “savings” per se, it is still revenue that will help you live comfortably during retirement.
- You can borrow against the equity. If necessary, you may be able to take out a reverse mortgage during retirement for a supplement to your income. This also is not “savings” in a technical sense, but the value and flexibility it provides you in retirement is similar.
For all of the reasons above, it is common for homeowners to retire more comfortably financially than renters, despite renters having more to invest in the stock market over their lifetimes. Ideally, you should pick a home you can afford while being able to still put some money into other investments.
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So, should you save for retirement or buy a house? How about both? If you are ready to make an investment in your future by purchasing a beautiful home, please give us a call at (540) 838-5868. We can help you with home purchase anywhere in Virginia.