Why a property is worthwhile as a retirement provision

Unlike shares, real estate is regarded as a secure retirement provision. Even if the purchase and maintenance can be associated with high costs. How can real estate serve as a retirement provision and why is it worth the financial effort?

The state pension will be lower and lower for many Germans in the future. The pension amount varies depending on how much was paid into the pension fund during working life. It is therefore already recommended to make private provisions for old age as early as possible. There are various ways to do this by owning your own property.

Owner-occupied residential property as a retirement provision

One LBS study which was published at the beginning of August 2022, owning your own property reduces your housing costs overall - even if owners who pay off a loan initially have more expenses and have to restrict themselves financially. Statistically, the savings for owners over 64 years of age who had paid off their property amounted to 205 euros per month. Homeowners also do not have to worry about rent increases and can modernize their property in such a way that energy consumption is also reduced in the long term.

Despite all the advantages and freedoms that home ownership has to offer, owners must not forget one thing: Repairs, maintenance measures and state-mandated adjustments (Building Energy Act) cost money. A financial reserve should therefore be created. Depending on the project, the costs can amount to far more than 1000 euros - even if there are state subsidies for some things. Owners or prospective buyers who have questions about increasing the value of properties or are looking for a financing partner for the purchase can seek advice and support from a qualified real estate agent in their region.

Real estate investment as a retirement provision

As a private investor, rental income generates returns that vary depending on the location, condition and furnishings of the property. This allows assets to be built up in a structured manner. Owners can deduct their property purchase costs and annual interest from their taxes. From the investment strategy and location analysis to the management of the property, there are many challenges that every investor faces. Anyone interested in real estate as a capital investment should therefore consult an investment broker for support. They can assess whether the investment is profitable and guide you through the process until the transaction is completed.

Retirement from owner-occupied property in old age

If you want to improve your finances in old age, you can annuitize your property. To do this, the property is sold with a right of residence and in return for a one-off payment and/or regular monthly payments. There are various models: the life annuity, the partial sale and the time annuity. If you have any questions about this or would like to annuitize your property, you can seek advice from a local estate agent.

Do you have questions about purchasing a property as a retirement provision? Then contact us. We will be happy to advise and support you.

Notes

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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