A Couple Million Reasons to Buy Real Estate and Get in Early

Today, I want to look at the way owning a house free-and-clear can help with your retirement planning. As of last year, the Bureau of Labor Statistics said that the average person at retirement age has around $427,000 in retirement savings.

When you consider how long life expectancies are and the cost of living, you are going to run out of money quickly. How does real estate fit in here? If you have a house that is paid off and look at the most conservative numbers, I’m assuming that you need around $5,000 per month in today’s dollars. I found one calculator that showed if I have $1.5 million in savings, then I would run out of money around the age of 95 or 96.

If you have been renting all that time and you are continuing to rent, rent prices are going to go up. I picked $7,000 for rent, which is a very conservative number for 15 – 20 years out (considering the way prices are increasing right now). Add this to the monthly expenses, and it means that you would need almost $4 million in retirement savings to run out of money around the same time in life.

Renting vs. Owning: How Much Retirement Savings is Needed

When the average American has $427,000 – it’s much less than what will be needed in the long run.

Even if you have a house paid off, you need $1.5 million. If you don’t have a house paid off, then you need $4 million. The moral of the story is that getting into a house early enough to pay it off is so important.

Talk to the Experts for Help

Keep in mind that I am not a financial planner. In addition to buying a house, there are many other ways to prepare for retirement with investments, 401ks, and more. Get with a financial planner to strategize on the best solutions. But statistically speaking, the average person isn’t going to get to $1.5 million.

It’s going to cost you to live somewhere, and it’s clear that getting in early so you can pay off your house before retirement – it makes a world of difference. My wife and I are using this strategy as part of our retirement preparation, in addition to saving. Having a house to live in without a mortgage payment will make that much of a difference in how much we need to have when we reach retirement age.

I don’t think there’s a single financial planner out there that wouldn’t agree with me. Buying a house and getting it paid off is an essential strategy for retirement.