Squirreling Away Nuts: How to Invest to Retire Early
Squirreling Away Nuts: How to Invest to Retire Early

Winter is coming. No, we aren’t talking about Game of Thrones. Their winter has already come and gone. We all know how that turned out. We are talking about retirement. What you do now determines whether you will spend your winters sunning yourself on a beach, cocktail in hand, or scrimping on the heat to save a few dollars while you nibble on instant ramen. Investing in real estate is one of the most effective ways to accelerate toward the former and avoid the latter. Let’s look at why real estate investing is crucial to making your retirement dreams come true.

Create a Paycheck

One of the scariest parts of retirement is spending all that money you’ve spent years saving. Like a squirrel who stores away nuts in the fall, if you haven’t put away enough, you will have trouble feeding yourself toward the end of the season. So, you have to guess correctly how much you will need. Estimate too low and you may run out; too high and you waste time working more than you need to. Working longer so you can amass a larger stash from which to withdraw seems, well . . . nuts when there is another alternative.

Real estate creates a source of ongoing income even after you’ve quit regular employment. It’s a paycheck for being forward-thinking enough to own income-generating properties. You spend almost no time on them, but you still get paid. Every rent check you collect means less you have to withdraw from other retirement accounts.

Unlike traditional employment, being a real estate investor is something you can do while enjoying other pursuits, such as travel during your retirement. You can hire a property manager if you want to spend even less time on your rentals. For a small percentage of the rent, your property manager can handle the nitty gritty of finding tenants and hiring plumbers. You have more time for your golf game while still having money coming in to cover green fees. What’s not to love about that?

Income-generating properties mean you continue getting paid, even after you leave employment. That’s less money you need to save before retiring and more time to enjoy your retirement.

Keep up With Inflation

Prices are rising on just about everything. Consumer prices are up 9.1% in the period from June 2021 to June 2022. That’s more than any time in the last 40 years. It’s no wonder inflation is a hot topic. It creates challenges for everyone, especially retirees who don’t have wage inflation to offset price increases.

Thankfully, real estate investment offers a solution. Rents increase over time, meaning those paychecks you have created for yourself grow.

Additionally, the value of your property should rise, just as the prices of everything else. That gives you a source to tap into with either a home equity loan or by selling the property should you need more liquid capital.

As a real estate investor, you benefit from inflation. Your income grows, and your assets increase in value. That can take some of the stress out of seeing the rising costs of everything from cars to groceries. You may pay more for your steak dinner, but your tenants also pay you more for their rent. That helps you keep up with inflation, so you don’t ruin that dinner with stress-induced indigestion.

A Little Bit of Everything

Real estate investment allows you to diversify your retirement savings. Owning stocks, mutual funds, and bonds is an excellent start to retirement planning. But the value of those can drop. Having your money in different types of assets can shield you from some of that price volatility. That makes your overall portfolio more stable because a drop in one area won’t have as significant an effect. That rental property that provides you with monthly paychecks also provides stability.

Diversification is a key component of a strong retirement plan. Owning real estate is a great way to add another asset class to your portfolio, giving you a more balanced asset allocation.

Even a blind squirrel finds a nut, but you don’t want to rely on luck when it comes to your retirement planning. Real estate investment is a proven, thoughtful strategy for getting to retirement earlier and having less stress once you are there. Where you invest your money can be at least as important as how much you squirrel away, so consider including real estate in your retirement plans.

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