Retirement? Don’t put your house on it…

© Ithica Publishing Services

A recent report shows more than two million people over 50 are basing their future prosperity on creating capital for their retirement through property, rather than a pension.

Most believe they will downsize when they hit retirement, and live off the equity difference. Others indicate they will move to a cheaper area, while some intend to keep their current home aided by an equity release product.

Many people with pension plans have saved for years, only to be disappointed by investment returns shown now that they’re advancing in years. Not surprisingly more than a third of people have stopped paying into a pension altogether, unable to afford the contributions thanks to the increased cost of living.

Almost half of those (43%) have no plans to start contributing again – meaning yet more people approaching retirement age without adequate pension provision.

So in our opinion these preferences for reliance on property rather than conventional pensions is simply a “cop out”.

For some it would seems that property may be a more reliable (and understandable) choice to fund twilight years. Given the widespread collapse of the property market, this of course is not without risk, particularly if investment in property is given as little thought or consideration as investing in investment funds held by a normal pension.

Let’s face it, most “property investors” have no clear strategy; they are simply “speculating” on anticipated capital gain in a property. They are making property purchases with little or no knowledge of the property market – these purchases are often referred to unkindly as “donkey purchases”.

In fact property investment is similar to equity investment in that to make real progress and create wealth you need both knowledge and strategy, or even better, a mentor to assist you.

To achieve worthwhile sums in retirement you either need to be a public servant in a good pension scheme or you need to understand that in order to build a worthwhile capital sum you need to use “smart pension strategies” rather than hard cash.

Smart pension strategies can in fact be applied to both investing in “normal” stock market based pensions and more flexible pensions. With stock market based investment a saver could utilise the added leverage of investment trusts – providing you seek advice from a specialist.

However for maximum leverage – establishing your pension within a highly flexible arrangement and combining your pension and a property investment can have a dramatic effect on your future wealth. In fact – if you decide to go ahead and combine the two, then with proper retirement planning you can get others to contribute to your pension for you!

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