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Is property still the best investment for retirement?

It is always prudent to look ahead and plan for the future. At least when you do so, there are more options available to you and making smart investments can help you at every stage of your life and the challenges you might face.

Planning for retirement as early as possible is advantageous, but is a pension or property the best investment to prepare for the later stages of life?

In the UK, the retirement age is edging ever closer to that 70 mark, and the amount required for modest retirement for each pensioner is moving closer to over £20,000 per year. The average pension pot is just over £60,000, so it comes as no surprise that investing in property seems a more lucrative option.

While the stamp duty holiday is due to return to its pre-pandemic levels in October 2021, the property market is far from bursting, and property could still be the place to invest, but doing so sooner rather than later would be advisable. After living through a pandemic, many of us can appreciate that accessing investment funds in an emergency or investing in other areas for a greater return is beneficial; a pension pot does not allow for such fiscal flexibility.

Retirement looks different to everyone. Some may want to retire to the Bahamas when they give up work and live a high life, while others may just want to maintain a good standard of living and a healthy lifestyle. A couple looking to achieve the latter in retirement should expect to require almost £50,000 a year to live on.

Planning for an early retirement means establishing an investment plan with long term goals. The best way to do this through property investment is to go down the buy-to-let route. This provides additional income above the outgoing costs, which can help create an excellent little investment for the future. The sale of the property can also be used to fund your retirement.

Multiple investments will provide a greater return.

Investing in one property can generate good returns, but investing in multiple properties can increase your retirement fund and could even help you retire early. Diversifying your investment portfolio could also help mitigate the risks. Investing in different property types, areas and price points will all help create a more balanced portfolio.

Location is crucial when considering where to invest your money on property. What areas are thriving, up and coming, what need is there in that area and which property would do well providing a steady income? The pandemic has seen many leave cities and head to the countryside. Having different types of properties in both these environments would increase the resilience of your property portfolio.

Consider the costs involved in property investments.

Buying property as a way of planning for your retirement could be a savvy move, but it pays to be aware of the associated costs, so you know the accurate figures for your retirement fund.

Regardless of whether you invest in a private pension, a property or both, you will likely have to pay income tax in either circumstance. When buying a buy-to-let property, there is stamp duty, and when selling, there is capital gains tax to pay. Not to mention the solicitor’s fees, estate agent fees, management fees, maintenance and repair costs…

So, is property still the best investment for retirement?

When planning for retirement, it is wise to have several streams to top up your pension pot throughout your working life. The impressive thing about property investments and why this remains a popular option for retirement is that it can pay into your pension fund and provide an income or other savings to tap into if the going gets tough.

As with all investments and pensions, it is worth seeking advice from a property expert and doing your homework on the property market if this is an avenue you are considering while planning your retirement.

Related blogs:

What to consider before you invest in a residential property.

The pros and cons of investing in commercial property as an alternative to residential options.