Why Real Estate Shouldn’t Be Your Only Retirement Plan

It seems like a ready-made retirement plan: once you enter your golden years, you’ll sell your home (or get a reverse mortgage) and live on the money you’ve worked your entire life to accrue. This strategy may work for some, but there’s no guarantee it will fit your financial needs. Before you make real estate your primary financial plan for retirement, consider these ideas.

Realestate retirement planIf you’re thinking of selling your own home to help pay for your retirement, there are a few factors to consider, such as how the sale of your home will affect your eligibility for retiree assistance programs and how your new plan to rent will affect your lifestyle. In addition, if you opt to participate in a reverse mortgage program, you’ll actually end up accumulating debt in the form of interest on your borrowing amount. And once you’ve sealed the deal, it isn’t as if you’ve got a landlord to take care of things; you still have to pay for any large-scale maintenance on your home while you live in it, not to mention the property tax.

The second real estate scenario is a trope so common that it’s beginning to border on cliche. Eventual retirees see real estate investment as a viable plan for raising money to live off of when it comes time to retire. But this plan has several holes, the main one being that no one can tell you how the real estate market is going to pan out as you come closer to retirement age. If you’ve invested in a piece of property to save money for retirement and the value of it goes south, you could actually end up with more debt, instead of savings.

Both of these cases should be motivation enough to come up with a multi-faceted retirement plan to keep you financially secure. One of the best steps you can take, if you haven’t already, is to find out more about your employer’s retirement savings plan and/or pension plan. Or, if your employer doesn’t offer these benefits, you can start your own Individual Retirement Account, which not only gives you a reliable way to save but also offers you a tax shelter on the income that you put away.

Once you have a vehicle for saving, start thinking about how you can build upon your nest egg. You’ll get social security benefits, but this is meant to be a supplement to your savings, not a primary means of living. In the meantime, you can make small income here and there by turning a hobby into a part-time job or selling discs on musicMagpie, for instance. Or you could plan to contribute all of your income tax refund to your retirement account each year for a large annual boost.

The most important goal to have when it comes to retirement is to build a portfolio of varied sources of income. It’s great to work toward a real estate goal, but a retirement savings account will keep you fiscally secure in case that plan falls through. A better option is to monitor this plan along with a savings account and any benefits that you can expect from the government; weave these several income possibilities into a strong net, and it will support you in your golden years.

Can a Debt Consolidation Loan Help You?

Deep in debt with no way out? While you may feel that all is hopeless right now, that doesn’t have to be the case. Often debt is just a temporary situation that you can get yourself out of. While your debt load may be a heavy burden now, it is possible to escape the shackles of debt.

Savings Ahead Sign

Chances are, if you own a home, it is one of your greatest weapons to help you get out of debt. With historically low interest rates, now might be the time to refinance your home to help with your debt consolidation Canada or in the United States.

How Does Debt Consolidation Work?

So, how does it work? If you have equity in your home, you can refinance and use that equity to pay down the debt you currently have, including, but not limited to, auto loans, credit cards and student loans. Some of these debts such as credit card debt likely have very high interest rates from 12 to 25%. If you refinance, you will have one monthly payment–your house–at a significantly lower interest rate than your current debts. Your money will be able to work harder at a lower interest rate.

The key to a good debt consolidation is to find a good debt relief agency to work with such as Debt.ca. They will help you not only consolidate your debts but also learn how to manage your money and make smart financial choices so you don’t end up in this situation again.

Once you consolidate your debt, you will notice instant relief. Your monthly payment on your refinanced home will likely be lower than you were paying when you had many separate bills to pay. If you had creditors calling your home at all hours, those calls will cease. If your wages were being garnished, that will end.

Debt consolidation can offer you a way to get out from under your debt. In addition, paying a lower interest rate on your home means eventually more money will be able to go to the principal faster than it would if you were still paying high interest debt.

Looking for The Quiet Life But Not in Dubai!

Even if you’re aged 20 something or thereabouts, it’s never too early to plan for retirement, right? How often have you heard that particular piece of wisdom? More importantly, how many of us can actually be bothered to think about retirement with several decades of commuter madness yet to suffer? The answer more than likely is very few of us. Yet, given the changing demographics we’ve all heard so much about, retirement could very well add up to an increasing chunk of your life. So where do you want to spend it? What about the United Arab Emirates (UAE) city of Dubai?

Dubai

Yes, we all have dreams and climbing the career ladder is probably one of them. So is spending the  increased salary on those little luxuries that help to make life rather bearable. Then at some point along comes a wife, or maybe a husband, a mortgage and 2.4 children later you’re struggling to make ends meet. Recognise the scenario? So you temporarily boost spending power a little bit by taking advantage of the credit card offers from HSBC, Barclays and the other major banks which are so hard to resist. As you walk the dog, no doubt thinking deeply about HSBC and personal banking, retirement is the last thing on your mind!

But let’s get serious for a moment. The UAE may be a great place to go on vacation and it’s not hard to find work there either. In fact, it’s an expatriate paradise. Millions of people from around the world settle in the country – and in Dubai in particular – for a year or two, and longer, reaping huge financial rewards in the process. Easy to do given the rather relaxed taxation regime. Who wouldn’t be able to save a little for the golden years when the tax rate is a big fat zero.

But a place to retire? Maybe, providing you don’t mind the searing heat, the crazy traffic, the relatively high cost of living and the frenetic lifestyle. Work hard and party hard appears to be the norm for many US, UK and many of the other expatriates from around the world attracted to incredible cities like Dubai. Would you want them living next door to you? Perhaps not.

Then there’s the cost of healthcare to consider which becomes ever more important as the years progress. A YouGov survey carried out at the end of 2012 revealed that UAE citizens were generally positive towards and trusted the healthcare sector in the country. However, they were concerned about healthcare costs and most would choose to seek treatment abroad if they fell seriously ill. They were also concerned about transient foreign workers.

YouGov says, “It is well-known that a large proportion of the specialized healthcare is made up of passing foreign workers and that the UAE is in close proximity to competitive medical destinations such as India and Jordan.”

Of those surveyed, 61% claimed they were not satisfied with the treatment costs; 60% saw the high prices of medical care as a substantial challenge for the healthcare industry; and 58% said they would choose to seek medical treatment abroad if they were to fall seriously ill.

Go here for more information on the YouGov survey.

**Photo by Eugene Kaspersky**

When Can You Eliminate Private Mortgage Insurance?

Private mortgage insurance (PMI) is often required for those who put less than 20% down on their homes. This insurance protects the lender from loss if you default on your home mortgage loan. While PMI can make it possible for you to qualify for a loan with a smaller down payment, you will need to pay a good sum for it. On a $200,000 loan, you will pay a little less than $100 a month for PMI.

Baby Boomers

Unfortunately, depending on the size of your down payment, you may be paying your mortgage (and PMI) for years before you own 20% of your home and can drop PMI. You will likely spend thousands of dollars on PMI.

If you would like to put more money on your mortgage quickly, one thing you can do is refinance your home. This can be especially usefully if you took out your loan several years ago when rates were higher. Refinancing and getting a lower interest rate means more of your money will be applied to the principal if you continue to make your original loan payment. A simple refinance can shave years off the time it takes you to be free of PMI.

To begin the process, shop for mortgage rates online using a site like http://www.mortgagerates.ca. From there, you can begin to talk to specific lenders.

Keep in mind you may need to fill out a mortgage application when you refinance as well as bring in all pertinent paperwork including W-2s, federal tax refunds, paycheck stubs and proof of investment income.

Another important variable is the cost to refinance. Refinancing can cost a few hundred dollars. How long will it take you to recoup that money? If you refinance, how much more quickly can you eliminate PMI? How much will you save in PMI by refinancing?

A refinance is not right for everyone, especially people who plan to move and sell the house within a few years. However, if you plan to stay put and want to gain traction paying down the principal of your mortgage so you can drop PMI, a refinance may be perfect for you.