August 14, 1935 – this date was the establishment of Social Security, which was a breakthrough movement in caring for our country’s elderly during their retirement years.Today, about 65 million or 1/6 of Americans collect benefits and the average monthly retirement amount received in January 2022 was $1,614 per month or about $19,370 per year.
This annual Social Security benefits exceed the 2022 Federal poverty level of $13,590 for individuals and $18, 310 for a family of two but from a practical level, it is nowhere near enough to be comfortable in your “Golden Years.”
So that you can begin to prepare an investment plan, every active adult in the work force can go to SSA.gov to find out what to expect to receive based on their planned retirement age. More than likely, it probably won’t be the amount you need to retire comfortably, but again, you can begin to plan properly.
You can use this quick formula as well to estimate the investable assets needed by retirement to generate a certain income. The target annual income is divided by a safe, conservative yield to determine the investable assets needed.
So here’s an example: A person wanting $100,000 annual income generated from a 5% investment would need investable assets of $2,000,000. If a person had $500,000 now, they would need to accumulate $1.5 million more by the time they retire. A 50 year old wanting to retire at 65 would need to save about $100,000 a year for 15 years.
More than likely, trying to save an extra $100,000 per year is basically impossible. But, you may want to consider the leveraged growth available in rental real estate. The use of borrowed funds can contribute to the yield earned by the investment. By reinvesting the positive cash flows from the rental to retire the mortgage, the home could be paid for by retirement, providing more cash flow when it is needed the most.
IRAs (Individual Retirement Accounts), SEPs (Simplified Employee Pension Plans), 401(k)s and other types of retirement are ones that many Americans have participated with – and they all supplement the benefits of Social Security. Many of these are invested in mutual funds which have lost about 20% in value in 2022. With inflation at a 40-year high, many retirees and future retirees are concerned about their income from these investments.
Most retirees want a safe and secure investment whose income will not be eroded by inflation. Single-family homes, in predominantly owner-occupied neighborhoods, meets those requirements. Home prices have experienced double-digit appreciation in the past two years and around 5% for the last five decades.
| Decade | Home Prices
Average Annual Increase |
Consumer Prices
Average Annual Increase |
| 70’s | 9.9% | 7.2% |
| 80’s | 5.5% | 5.6% |
| 90’s | 4.1% | 3.0% |
| 00’s | 2.3% | 2.6% |
| 10’s | 4.9% | 1.8% |
| 20 + 21 | 12% | 3% |
| Source: NAR & Bureau of Labor Statistics |
An increase in mortgage rates combined with rising home prices have completely caused some would-be purchasers to be sidelined with decisions. Since they cannot buy at this time, the next best alternative is to rent a home. This in turn causes an increased demand for single-family homes in good neighborhoods which have resulted in increased rents. While this isn’t good news for tenants, it is for investors.
In short, investing in rental real estate could be a way for you to increase your retirement income and grow your net worth while avoiding the volatility of the stock market. Current homeowners already are aware of the value of homes as well as the maintenance they require.
To get more information about single-family homes for rentals, download our Rental Income Properties guide. You can also schedule a time with me to get answers for any questions you may have and find out about what is available now.
I can provide Insider Information on Fairfax VA homes for sale. Get you a FREE Market Snapshot Report of Your Northern Virginia Home’s Value, or Search All Northern Virginia Homes For Sale. Put that data you need at the tips of your fingers!