In discussions with Clients, the team at Acumen regularly get asked “My money’s in my property, do I still need a pension?” Within this blog, Angela offers advice on the risks of having your retirement income tied up in your property.
Retirement income tied up in property is risky
Relying on your property to fund your retirement income could be very risky. To begin with, to release any cash you would need to move home and downsize, and when the time comes, you may not want to do that.
We talk about property being like a lobster pot – it’s easy to get in to and often very difficult to get out of!
Moving house is costly!
Buying and selling a property can involve a lot of cost, sometimes because you need to sell at a time when the market isn’t too favourable, or you have to sell in a hurry and be forced to accept less than you hoped for. Stamp duty, solicitor’s costs and not to mention the general stress and upheaval are all factors to take into account.
Alternatives for retirement investments!
One alternative is equity release, which can be a good idea for many people and we have our own specialist advisers who can help you with this but that’s a topic for another day. It is important to recognise that having all your investments in one asset, a house, does mean that your money is tied up and you will be at the mercy of the property market when you need to sell.
Buy to let properties can provide an income and we have a significant number of clients who successfully hold property as part of their investment portfolio – but these rented properties are not without problems, for example difficult, uncooperative tenants who don’t pay their rent and don’t look after the property in a responsible way. This can be a real stress and it’s worth considering whether you want your retirement to be a time of life when you can relax a bit more and aim for less stress, not more.
Property isn’t always the best solution for retirement
You can’t buy residential property with a pension fund so by just holding buy to let property you miss out on the valuable tax relief that pension investors get too. There aren’t that many tax breaks left these days and we think it’s important to make the most of the ones that are still available. We are highly selective about the investments we recommend for our clients and not all pension plans are the same either – so we go the extra mile to make sure all our clients are getting exactly the right mix for their individual needs.
For retirement advice call 0151 520 4353 or [email protected].