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How to Use Real Estate for Retirement Income

If you’re nearing the age of retirement, you may be wondering how real estate could play into your retirement income. Real estate can absolutely be an incredible asset for you during retirement if used correctly and managed properly. Below are some of the ways that retirement income can be used to be a part of funding your future:

– Selling your home. Selling your home, especially if you want to downsize and you have sizable equity, could give you a few options. The IRS allows you to profit up to $250,000 for a single person or $500,000 for a married couple without having to pay capital gains taxes on it. You can use this extra income to provide for retirement savings if you need it.

– Buying rental property. If you don’t need to sell your person home, you can incorporate rental property into your retirement plan. This is especially a great idea if you live in an area where rent is high and you could not only cover the mortgage and expenses but also have extra monthly income on top of that. One benefit of rental income is that the income from this does not count as earned income and therefore does not reduce Social Security payments. You would have to pay taxes on the income, of course, but these payments can be reduced by deductions and this can end up being nice supplemental income for those in their retirement years.

– Use money from your IRA to buy investment property. One little known way to incorporate home ownership into your retirement plan is to use money from your IRA, or individual retirement account, to purchase investment property that will be occupied by a tenant. Of course the income generated from this property purchased with IRA funds has to be used in line with the required timeframes for withdrawals and distributions so that you don’t pay additional taxes and penalties. Not all of the funds have to come from your IRA, so you can “partner” with your IRA at any percentage. This is a great way to invest tax-free and not have to pay taxes if you’re using money from a Roth IRA!

If you are interested in learning more about how real estate can be a part of your retirement portfolio, talk to a trusted financial advisor to determine next steps based on your age and your retirement plan!

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