The following is a guest post by Compare the Market.
Planning for your financial future is a lot like forecasting the weather. You can make some general assumptions about what might happen, but you never really know what to expect until you are much closer in. A job that was bringing in a steady income could be lost in a recession, or a medical emergency could devastate your savings. Therefore, it is best to have as much control over your finances as possible when trying to plan for the future.
Coming up with a plan for retirement is going to be different for each person. Some companies offer great benefits and an amazing pension. However, there are other people out there that are going to have to save and sacrifice their entire lives to make ends meet in a potential retirement. Not all retirement scenarios are going to be created equal, it isn’t always as simple as saying that having a good retirement plan is something you should shoot for.
[Kevin] Couple this with governments raising retirement ages around the world, and it is important to boost your savings rate!
Owning A Home
Home ownership isn’t always the answer either, but it is a better answer than assuming your retirement plan will come together. Owning a home gives you several financial options regardless of what your financial situation is after you decide to stop working. Having equity in a home will allow you to have money to borrow in case of a financial crisis. Equity in a home is also important if the owner decides to sell the home sometime in the future. Home values are down now, but a homeowner who paid 100,000 dollars for a house 30 years ago could still make a nice profit off the home.
[Kevin] Just be sure to not get in over your head, and buy more house than you can afford.
Why Not Rent Out Your Home
You might not get a nice pension or benefits after you retire. However, every homeowner has the option of renting out the place to get extra income. Assuming you own your home free and clear, a rental income of 800 dollars or more a month could be a nice boost to your retirement income. Renting out your home can also offer tax breaks that other sources of retirement income may not qualify for. It is a creative solution to make sure that you always have enough money in your bank account.
[Kevin] This could be a good option, especially with renting on a resurgence!
Government Programs Can Assist With Health Care Costs
Medicare and other government health care programs can help seniors afford health care coverage. The AARP is another group that will help those over the age of 55 afford the costs associated with living after retirement. With all of those resources out there, do you really need to worry about planning for your retirement? It seems as if you are going to have at least basic levels of assistance no matter what. Combining government assistance programs available to everyone with the income that a house can generate should make retirement work for you.
Retirement planning does not offer any life assurance. You never know when your investments in the stock market could go south, or your employer could cut your pension and benefits just before you retire. Do yourself a favor and buy a home as soon as possible. Pay off the mortgage as soon as possible to ensure as much equity in that home as possible. Your equity will allow you financial flexibility in retirement, and renting out your home will provide you alternate revenue streams as well.