When planning your finances for retirement, it is best to consult an accredited advisor. You need to evaluate how you plan on generating passive income once you are retired as the sad reality is that your pension will probably only cover the first 5-10 years of your retirement. After that, you may find yourself in a precarious financial position. Starting your retirement planning at an early age will allow you to have passive income to carry you throughout your retirement years. I’m specifically talking about investing. Simply put, investing whatever available money you can from as early as possible will provide a financial security net when your retire.
Property investments are a firm favourite today. The current financial climate will, to a large extent, allow you to snap up properties that are undervalued due to the slump in the market. When the market recovers, you will be sitting on good property investments. Renting out these properties will help you afford the mortgages on the properties and then when it’s time to retire, the properties may be paid off completely thus providing a monthly income. Alternatively, you can sell them off at a profit, providing you with a nice nest egg. The profits from sale could either be reinvested in another kind of investment such as stocks or additional property.
The major downside with renting property is the tenants and costs of maintenance associated with renting your property. Tenants my be tardy with their rent or may cause damage to your property. Their security deposit may take care of any wear and tear on your property or any other damage that may occur from habitation, but you also need to consider unforeseen maintenance costs. These will be your responsibility as per your lease agreement. If a geyser explodes or pipes burst, you will be liable to do the repairs. If your budget is stretched to the limit, you may be unable to afford the repairs and this will obviously be a major problem.
Try and keep tenants’ security deposit in a fixed deposit account. You will earn interest off their deposit and you won’t accidentally spend it. When your tenants give their notice, you can give the bank notice and withdraw their deposit without incurring any penalties.