These days the subject of retirement is a hot topic. Many have retired early during COVID. And most people are re-examining their retirement strategies in an environment with higher inflation.
The reality is that inflation has always been around, but right now it has spiked due to a massive surge in demand that awaits the world's producers and manufacturers to catch up. Our under-investment in infrastructure and the re-education and education for the jobs of the future, Covid-related deaths, retirements and career changes, etc may keep inflation elevated for a while. Inflation erodes savings, especially cash. Hard assets are often the best hedge against inflation.....including real estate.
Adding to the inflation concerns is the fact that we are living longer. Yes, the average American's lifespan slipped in 2020 due to COVID-related stats, but most of us will live a lot longer due to major medical breakthroughs, with more coming every day. The average US life expectancy has increased over 10 years since Social Security was started. This program was initiated to help support Americans in their 'final years' and has not been adjusted to new realities. Will there be enough to fund the vastly increased aging population?
A paid off home affords many an outstanding source of retirement 'income'. The number of people 62-years-old-plus (That's the age Americans are termed a 'senior' in the real estate world) taking out mortgages has soared in the past decade. Total debt for Americans over age 70 increased 543% from 1999 through 2019. Many of these people are still paying down mortgages, but many are taking out equity to pay for retirement too or re-investing this capital with higher returns.
The median homeowner aged 50–64 had a net worth of $292,000 in 2016—almost 60 times that of the same-age median renter. Yes, buying and owning a home may not make you rich, but the money you might have spent on rent sent to a bank instead builds equity over time. And at some point in those twilight years, that equity may be very useful to boost retirement savings.
And real estate usually rides inflation well, escalating in value over time with inflation. In 1980 the median US home value was $47,200, and by 2000, it had risen to $119,600. Today the median existing home price is over $350,000. $350,000 worth of equity translates to over $3,000 per year of income over 10 years in retirement.....
