Should Retiring Canadians Own or Rent? Discover the Simple '5x5x5 Rule'

Faced with the rising cost of living, many American retirees are looking to control one of the most fundamental expenses: housing.

Due to the pandemic, housing costs have stayed unexpectedly elevated. As reported a recent report In January, home affordability declined even more, with price increases requiring higher incomes for mortgages in 12 out of 13 major market areas.

Relocating can be challenging under ideal circumstances, particularly so for those who are retired. Choosing between leasing a dwelling or purchasing one will significantly affect both their financial situation and daily life over time. Retirement specialist and YouTuber Geoff Schmidt recommends adopting his 5x5x5 guideline as an aid to determine which choice suits you better.

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About the 5x5x5 formula

The 5x5x5 guideline helps clarify decisions about moving by examining the advantages and disadvantages of leasing versus buying over both brief and extended periods. For retirees, an essential factor is considering their future location—not only in terms of geography—but also what it will look like ten years from now. Below is a detailed explanation for each ‘five’ within this approach.

5 pros of ownership

The initial step when considering purchasing a new home for retirement involves reflecting on the five significant advantages of being a homeowner. For those retiring, the benefits of owning a house enable you to:

1. Accumulate equity in your house Each mortgage installment you pay gets you one step nearer to fully owning your house without any further payments. Should you purchase a new home or condominium using the proceeds from selling your present property, you will continue to accumulate equity in your new place gradually.
2. Predictability If you opt for a fixed-rate mortgage, your payment amounts will stay steady for many years, and you won’t have to concern yourself with a landlord potentially asking you to leave.
3. Tax benefits : While mortgage interest and property taxes are not tax-deductible on a principle residence, you could find tax deductions if you use a portion of your home for a home-based business or to rent out as short-term accommodation or to a long-term tenant.
4. Customization You aren't required to get a landlord’s approval to make alterations and enhancements to your property.
5. Home appreciation Homes typically appreciate in value over time, allowing you to boost your net worth through property ownership.

5 pros of renting

Leasing comes with five notable advantages, especially beneficial for retired individuals seeking more flexibility to explore and relocate—possibly nationwide or overseas. These benefits include:

1. Extreme flexibility You can vacate your premises after providing notice and travel anywhere you please far more readily compared to selling an illiquid home first.
2. Lower upfront costs You only need to pay the first and last month’s rent plus a security deposit to move into a rental; you don’t have to make a substantial down payment like you would for buying a home.
3. No maintenance concerns If something gets damaged, your landlord has to cover both the repair costs and the expenses for actually fixing it. There’s no need for you to set aside money specifically for maintenance emergencies.
4. Predictable expenses During your lease period, your monthly housing expenses, which include utilities, will stay constant, regardless of increases in energy prices, for instance.
5. Lack of worry If you're living in a rented apartment, you won’t have to worry about shoveling snow, mowing the lawn, or handling other aspects of exterior maintenance.

5 factors to consider when deciding between renting or buying

The final step of the 5x5x5 rule involves taking into account particular factors that impact you directly. These encompass:

• Financial stability When looking at your present and anticipated CPP benefits along with your retirement income, would leasing property prove to be more cost-effective over time, or might purchasing provide greater advantages?
• Lifestyle preferences Consider what enhances your quality of life and resonates with you. It could be that being near your family is most important. Alternatively, you might prioritize proximity to facilities such as healthcare services and recreational areas. Are you leaning towards having greater stability or more adaptability? Between purchasing and leasing, which choice aligns best with your preferences?
• Current and future health Are you able to sustain your home, and does it include features for aging in place?
• Estate planning Do you wish to leave a house behind for your family as part of your legacy?
• Market conditions Is now a suitable time to purchase a property? In your opinion, what changes might occur in the housing market over the coming ten years?

By posing these specific questions regarding your individual financial objectives and lifestyle choices to yourself, you can more easily determine whether owning or renting makes sense for both the present and the future.

@plaacement()

This article Could Canadian seniors choose between owning or renting their house? Apply this straightforward '5x5x5 guideline' to help make that decision. originally appeared on Money.ca

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金融資産8100万円で「労働をいつやめても問題ない」66歳男性が現役時代にお金 を使えばよかったと思う理由

相次ぐ物価上昇で「もはや老後資金は2000万円では済まないのでは」と、不安が増す昨今。ただ、「現役時代にもっと貯蓄すべきだった」と嘆く人がいる一方で、「元気なうちにお金を使うべきだった」と悔やむ人がいるのも事実です。

実際、年金生活でどれくらいお金が必要なのか。いくら貯蓄があれば安心して老後を迎えられるのか。All Aboutが実施したアンケート調査から、広島県在住66歳男性のケースをご紹介します。

回答者プロフィール

回答者本人：66歳男性

同居家族構成：本人のみ

居住地：広島県

リタイア前の職業：不明

リタイア前の年収：450万円

現在の金融資産：預貯金8000万円、リスク資産100万円

これまでの年金加入期間：国民年金40年、厚生年金（加入期間不明）

現在の収支（月額）

老齢年金（国民年金・厚生年金）：14万9200円

障害基礎年金や障害厚生年金（障害年金）：なし

遺族基礎年金や遺族厚生年金（遺族年金）：なし

その他（企業年金や個人年金保険など）：なし

年金以外の収入：給与収入5万円（荷物配送の仕事を週3回程度）

ひと月の支出：約10万円

「金銭面には余裕がある」

現在、およそ預貯金8000万円、リスク資産100万円を保有しているという投稿者。

自身の老後資金について貯めすぎと感じているか、それとも足りないと感じているか、との質問には「現役時代にもっと使っておけばよかった・正直貯めすぎた」と回答。

その理由として「健康状態に問題がないため。今のところ大きな病にかかった経験がなく、持病もない。戸建てを購入してローンも支払いきっており、現在1人暮らしなので、出費も限られている。金銭面には余裕がある」と語ります。

「老後資金は5000万円程度でもいいのでは」

現役時代は、老後資金として「6000万円」貯めることを目標にしていたそう。

「病気や事故など、何かトラブルがあった場合に、とりあえず備えておいた方がいいと思っていた金額」だと言い、「できるだけ自炊」をして食費を抑えた他、「酒やタバコなどの嗜好品には昔から手を出さなかった」ことで、目標金額の達成に至ったようです。

しかし実際に年金生活を迎えた今、老後資金は「5000万円」程度でもいいのでは、と感じているという投稿者。

「もっと、自分の趣味や娯楽を見つけるためにも、若い頃から、もう少しいろいろと旅行をしたり、バイクやカメラなど興味を持ったものに金銭を費やしたりしていれば、現在もう少し人とのコミュニティを持てたのではないか」と、心残りがある様子でした。

「金銭を使ってでも、若い頃にいろいろな経験を積んでおくべき」

とはいえ、今の生活の満足度については「満足している」とのこと。

「今現在、自分が生活している中で、特に金銭的には不自由はしていない。アルバイト等の労働をいつやめても、今の年金受給額なら、1人暮らしには特に問題もない」と言います。

老後資金に不安を抱えている現役世代には、「自分が興味を持った物事には、金銭を使ってでも、若い頃にいろいろな経験を積んでおくべき」とアドバイス。ただ、「過度な金銭の出費は、後々生活を苦しめるので、できる時に少しでも副業などをして、貯蓄をしておけばいいと思う」とも補足されていました。

ーーーーーーーーーーーーーーーー

※本文カッコ内の回答者コメントは原文に準拠しています

※エピソードは投稿者の当時のものです。現在とはサービスや金額などの情報が異なることがございます

※投稿エピソードのため、内容の正確性を保証するものではございません

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4 Essential Assets Retirees Should Never Liquidate for a Secure Financial Future

As you age and your financial circumstances evolve, you may be inclined to liquidate your retirement holdings for immediate benefits, particularly when dealing with issues such as inflation Fear and financial unrest can unsettle your mind. Nonetheless, even though you're retired, it doesn't imply you should act impulsively with your nest egg.

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When individuals claim that accumulating wealth requires a prolonged effort, they imply an indefinite timeline. Securing financial stability for yourself and those close to you necessitates specialized planning to ensure monetary gains from your choices and prevent buyer’s regret.

The following are four items that financial advisors recommend retirees not liquidate when aiming to boost their savings. However, if you're seeking additional ways to increase your savings, consider exploring the alternatives provided below. retirees ought to liquidate these assets to bolster their savings .

Making passive income does not have to be complicated. You may begin this week.

Your Home

When confronted with financial difficulties during their golden years, individuals frequently consider selling their homes as a solution. Utilizing the equity from one's residence might offer essential funding for retirement; however, this decision may lead to significant relocation expenses, worries about living comfortably at an advanced age, and challenges related to obtaining a reasonable price amidst fluctuating real estate and rental market conditions.

"While selling your main home may be beneficial in certain scenarios, it's crucial to consider the possible drawbacks," stated Chad Gammon, CFP, who is the owner of Custom Fit Financial A retiree who owns their house may not fully grasp the costs associated with buying a new home or leasing one. Furthermore, the expenses involved in getting a home ready for sale can accumulate rapidly without actually boosting the property's worth.

Be Aware: 7 Aspects You'll Likely Rue When Shrinking Your Footprint in Retirement

Your Life Insurance

If you're carrying debt or continue to earn an income during retirement, retaining your life insurance policy could be beneficial. This can assist with various financial burdens like estate taxes, funeral costs, unexpected expenditures, and guaranteeing a secure financial future for both your children and grandchildren.

"Although it might be enticing to relinquish these policies for their cash value, it's crucial to grasp the wider advantages they offer," stated Chris Heerlein, who serves as the CEO. REAP Financial , an SEC-registered investment advisory firm focusing on retirement and wealth management. "In addition to the evident death benefit, permanent policies can provide a tax-favored means of obtaining funds." policy loans or withdrawals , which can greatly assist with unforeseen costs.

“Heeren noted instances where retirees encountered unexpected medical crises and relied on their life insurance policies for essential financial support. If they had sold these policies instead, they would have lacked this critical safeguard, potentially leading them to deplete their retirement funds or accumulate debts.”

Your Treasured Items and Ancestral Possessions

Family heirlooms carry emotional significance and contribute to one's heritage. Dispensing with them could potentially cause tension within the family unit; thus, "it's advisable to discuss this matter with relatives first since another person might cherish and appreciate these possessions," according to Gammon. Additionally, you might experience remorse over giving up such keepsakes further down the line.

When it comes to collectibles, the story remains similar. The worth of items such as artworks, antique pieces, classic automobiles, and memorabilia collections may rise considerably over time. Selling these valuable possessions hastily when facing monetary difficulties could end up costing you substantially more in the long run.

Find out the worth of heirlooms and collectibles through appraisal, then either hand them over to family members or establish conditions for their transfer in your will.

Your Vehicle

Exceptions aside, generally speaking, owning a car does little to increase your net worth, and when selling it, you're unlikely to recoup much of your investment. Even though numerous older adults stay engaged during their golden years, retiring often means no longer needing to commute and embracing a more peaceful domestic lifestyle.

Getting rid of one of several cars during retirement can be wise, however, keeping your single dependable vehicle could save you from the hassle and costs associated with using public transport and ride-sharing services nearby.

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Retirement Regrets: What 25% of Aussies Wish They Did Differently After Quitting Work

Currently, there are 4.2 million retirees in Australia, and based on fresh insights from insurance company TAL, about 28 percent of these individuals regret not being more extravagant with their funds and savoring the initial stages of retirement more. retirement more.

Another 16% expressed that they wish they had fretted less over savings. superannuation for a rainy day.

TAL has recently published a research document outlining what retirees wish they had been aware of prior to retirement.

Let's explore further and uncover the insights this offers for those approaching retirement who are still employed.

Regret number one after retiring: Insufficient planning

Research indicates that 22% of present-day retirees worry about depleting their superannuation funds. Additionally, this concern contributes to financial strain for 32% of those aged 80 and older who are using up their savings.

The AFSA Retirement Standard offers advice on the amount of money Australians require for their retirement.

According to reports, Australian couples require $690,000 in their superannuation fund, along with complete homeownership and some pension support, to ensure they have a comfortable retirement. Singles, meanwhile, would need at least $595,000 in their superannuation account under similar conditions for the same lifestyle during retirement.

Alternatively, having $100,000 in superannuation for both couples and individuals, along with a partial pension and complete homeownership, can suffice for a 'moderate retirement'.

These numbers are based on the assumption that retirees will use up their superannuation savings and reinvest them at an annual return rate of 6%.

As per data from the Australian Bureau of Statistics (ABS), superannuation plays a crucial role in this context. primary source of livelihood for over a quarter of retirees And at least one source of income for nearly 40% of retirees.

Early retirement regret number two: You might find yourself compelled to leave work sooner than planned.

A lot of individuals anticipate retiring between the ages of 65 and 69; however, data from TAL shows that 59% ended up leaving work sooner than planned.

This reinforces the need to plan ahead financially, as you may not have until your 60s to get organised.

A fresh report from the Australian Bureau of Statistics shows the leading four causes for retiring among the top five include unexpected situations such as being laid off, getting injured, or needing to look after another person.

Ashton Jones, who serves as the General Manager for Growth, Retirement & Wealth Partnerships at TAL, stated:

If retirement comes earlier than anticipated, it can disrupt an individual's capacity to prepare as thoroughly as they might have hoped for.

Several prevalent topics among retirees included their desire to have contributed more to their superannuation accounts when they still had the opportunity, or to have begun salary sacrifice at an earlier stage.

The financial advice firm Findex indicates that over half of Australians lack awareness regarding this matter. substantial tax benefits can be achieved via salary sacrifice arrangements or by making additional personal contributions to their superannuation.

Regret of retirement number 3: Never anticipated living so long!

According to the TAL report, about one-third of retirees find themselves living longer than they initially expected at retirement. TAL suggests this underscores the advantages of retirement solutions that provide lifelong income.

Once they retire, Australians generally tend to take one of five moves for their retirement savings .

The top preference involves transforming superannuation into a consistent income flow through a pension account, accounting for 34%. Another 27% opted to keep their funds within their current superannuation account. Approximately 15% chose to withdraw a lump sum instead. Lastly, 18% decided to shift part or all of their superannuation into a lifelong retirement income source, similar to an annuity.

Were pensioners satisfied with their choices?

Looking back now, it appears that numerous individuals might have opted for different financial decisions during their retirement years.

The study indicated that 56% of retirees who took out all or the majority of their super funds expressed satisfaction with this choice.

In comparison, 87% of retirees who transferred their funds into a lifetime income stream or pension account expressed satisfaction with this decision.

The post Regret After Retirement: What One in Four Australians Wish They Had Done Post-Workquit appeared first on The Motley Fool Australia .

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Martin Lewis Reveals the 'Scary' Savings Rule You Need to Know

Think you’re saving enough For your retirement? Likely not, based on a commonly cited pension guideline mentioned by Martin Lewis .

In the most recent issue of his newsletter, the founding figure of Money Savings Expert (MSE) directed attention towards pensions , featuring assistance on navigating everything from locating missing items savings to maximising your investment .

Amidst all this guidance, he also explored how much we ought to set aside for our retirement years — and the findings are quite alarming.

"Take a deep breath," encouraged Martin, prior to sharing a 'frightening' guideline for determining your path to an adequate destination. pension savings pot.

He clarified: "Consider the age at which you begin contributing to your pension, divide it by two, and that figure represents the percentage of your gross income you should strive to allocate towards your pension." throughout the remainder of your career for a robust retirement income.

'So begin with 20, which accounts for 10% (including the employer's contribution). At 40, it becomes 20%.'

Comment now Are you saving enough for your retirement? Share your thoughts below Comment Now

If we break that down, it indicates that someone who is 40 years old would be on the mean British income relative to their age ($71,650 AUD) is expected to contribute $14,330 AUD towards their pension this year. In contrast, someone aged 20 with an average salary of $40,440 AUD should put aside $4,044 AUD.

Keep in mind, precise figures may rise or fall according to your earnings, and your individual contribution can vary based on what your employer contributes.

Nevertheless, the workout provides a valuable – though blunt – understanding of what happens when you choose to ignore reality.

Don't fret, scarcely anyone reaches that stage," Martin said. "The key point is that starting early is preferable since it gives you more time for your returns to accumulate.

The MSE website Highlights that 'many individuals cannot initially contribute sufficient amounts according to the "half your age" guideline,' hence you should 'begin with what you're capable of.'

It's recommended to allocate a fixed percentage (instead of a specific dollar amount) every month, ensuring you stay updated as your income increases.

Martin also shared another piece of advice specifically for those reading his newsletter: “Each time you receive a salary increment, try to allocate a portion of it towards your pension fund before you adjust to the extra income.”

Lifestyle inflation (also referred to as lifestyle inflation It's actually a genuine concept, so jumping in front of it can be a clever method to outsmart yourself into becoming more accountable.

Spending in the here and now is often necessary, but just think how happy ‘future you’ will be if you look out for them too.

Have a tale you'd like to tell?

Reach out via email aynur1015.blogspot.comLifestyleTeam@aynur1015.blogspot.com.co.uk .

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How Much Should You Contribute to Your Pension to Retire Comfortably at 60?

There is no standard option anymore. retirement age in the UK; while you won't receive your state pension, pension Up until the age of 66, you have the option to retire early provided you have the financial means to do so.

After retiring, you might not get a steady income anymore, yet bills will still pile up and you'll require funds to make the most of your retirement days.

As per the regulations concerning pensions and lifetime savings, Savings Association (PLSA), the average cost of a moderate retirement for a single person - that covers luxuries such as one foreign holiday a year and eating out a few times a month - is £31,300 annually.

To produce such earnings through an annuity—a financial instrument that utilizes your pension to buy you a consistent yearly income for life—specialists advise that retirees might need a savings fund as large as £615,000.

What happens if your goal is to retire when you reach 60?

Early retirement might seem like a fantasy, yet you'll have to achieve it sans the perks. state pension If retiring at that age, this is due to the current state pension age being 66 and set to increase to 67 by 2028 and then to 68 by 2046 for the majority of individuals.

You can still access your private pension savings though from age 55 as well as any other income such as investments or a buy-to-let portfolio.

Here is how much you would need to pay into your pension to retire by age 60.

Consider how much you need to retire

The amount you need in retirement will differ depending on what you are planning to spend your money on.

Ian Futcher, chartered financial planning consultant at wealth manager Quilter, said: “Crucially, retirement at 60 isn’t just about the numbers, it is also about your lifestyle.

“Many people are still active at 60 and want to spend time travelling, taking up new hobbies, or enjoying their freedom.

“These costs can be higher in the early years of retirement when you’re more likely to be out and about. This is why it’s often advisable to front-load some of your pension savings to allow for more spending in your 60s, before you settle into a more steady routine later on.”

Having an idea of how much you will need to retire can help determine how much you need to contribute.

Futcher adds: “Ultimately, the right amount to contribute to your pension will depend on your personal circumstances but aiming to replace at least 50-60 per cent of your working income is a reasonable rule of thumb.

Obtaining guidance from a professional financial advisor can assist in making sure you're well-prepared for a comfortable retirement and the lifestyle you desire.

Start early

The sooner you begin saving for your pension, the longer you'll have to weather fluctuations in the market and the greater your likelihood of achieving your financial goals.

You could also commence with modest amounts provided you begin sufficiently ahead of time.

According to research conducted by investment firm Hargreaves Lansdown, a person retiring at the age of 60 would require approximately £615,000 in their pension fund to yield an annual income of about £31,500 via an annuity.

To reach their goal, they would have to save roughly £583 each month from age 22 to 60, as indicated by the study.

The HL Savings and Resilience Barometer indicates that the price for a modest retirement stands at £25,000, with an individual required to set aside approximately £435 each month towards their pension.

Helen Morrissey, who leads retirement analysis at Hargreaves Lansdown, stated: "Early retirement might appear ideal, yet achieving this requires making your pension fund perform exceptionally well. In truth, you must be prepared to significantly curtail your current spending habits if you wish to leave the workforce prematurely."

It becomes somewhat more challenging when you begin later.

According to an analysis by Quilter, adhering to the PLSA guidelines, one would need to contribute £1,493 per month starting at age 35, with this figure increasing to £2,727 monthly when reaching age 45 for a comparable sum.

Futcher commented, "If someone begins saving in their 20s, they may only need to set aside 15-20 percent of their income; however, those who start at age 40 would likely have to save considerably more. While employer contributions, tax benefits, and investment gains can alleviate some pressure, the crucial point is to initiate savings early and consistently reassess your strategy."

The danger of leaving work prematurely

The primary difficulty of retiring at 60 is that you will have nearly ten more years until you can receive your state pension.

That was an opportunity for you to keep adding to your pension, enhancing your nest egg and taking advantage of additional gains in the stock market.

Rather, Morrissey cautions that leaving work prematurely and prior to qualifying for the state pension implies that your personal retirement savings will have to bear the burden, potentially causing you to lose out on returns from investments.

Instead of opting for an annuity, you can remain invested using a product known as drawdown and make periodic withdrawals from your fund; however, this approach carries the risk of depleting your savings over time.

Futcher comments: "Should retiring at 60 be your aim, calculating the amount to contribute to your pension necessitates thorough planning."

The sooner you retire from work, the more years your retirement savings must cover, and you'll have to fill the gap until the state pension begins.

When you invest, your money is not guaranteed and you might recover less than what was put in. Previous success does not ensure future outcomes.

Whether it’s from news to politics, travel to sports, culture to climate—the Independent offers an array of free newsletters tailored to your preferences. To get the stories you’re interested in delivered directly to your inbox along with additional content, simply click. here .

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How Much Superannuation Will You Really Need for a Comfortable Retirement?

A major financial query for Australians revolves around determining the adequate amount of superannuation required. retire comfortably.

Although the commonly quoted sum of $1 million might appear as the perfect goal, the truth is that there isn’t one-size-fits-all solution.

The requirements for retirement differ according to individual lifestyles, personal situations, and availability of extra income like the Government Age Pension.

The truth about superannuation balances in Australia

Even though many people think you need a multimillion-dollar superannuation balance to retire comfortably, most Australians end up retiring with significantly less.

As per guidelines from the Australian Tax Office, courtesy of Australian Super The median superannuation balance for people between 60–64 years old stands at $211,996 for males and $158,806 for females. Although these amounts might appear modest when measured against certain retirement projections, the Age Pension acts as an essential financial safeguard for individuals who haven’t saved enough.

Nevertheless, depending exclusively on the Age Pension might not offer the degree of comfort that many aim for during their retirement years.

It becomes crucial to establish a retirement savings target that matches your individual hopes and desired way of life.

A comfortable retirement

A good initial step in determining your required superannuation amount is to clarify what a desirable retirement entails for you.

Some people may opt for lots of travel and regular social activities after retiring, whereas others might prefer a more peaceful life centered around family time and personal interests.

The Association of Superannuation Funds of Australia ( ASFA ) sets a standard for two kinds of retirement living arrangements:

• Comfortable lifestyle – Enables a decent quality of life, encompassing private healthcare coverage, routine recreational activities, and periodic trips.
• Modest lifestyle – It covers fundamental living expenses such as necessary outlays and certain recreational activities, though leaving little room for additional personal expenditures.

What amount of superannuation savings is required?

ASFA suggests that for a comfortable retirement, retirees should have the following superannuation balances upon reaching 67 years of age:

• Single person: $595,000
• Couple: $690,000

Whereas, for a humble retirement, retirees need considerably less:

• Single person: $100,000
• Couple: $100,000

It is worth noting that these figures assume homeownership and do not factor in rental costs, which could significantly impact the amount needed.

What is the annual amount required?

Based on ASFA's Retirement Standard, retirees require these yearly budget amounts:

• Comfortable lifestyle: $73,031 annually for a couple, $51,814 yearly for a single individual.
• Modest lifestyle: $47,475 annually for a couple, and $32,930 yearly for a single individual.

In contrast, the Age Pension offers a significantly smaller yearly income, highlighting the crucial role of superannuation savings in bolstering governmental assistance.

Preparing for your dream retirement

Several elements should be taken into account when assessing the amount of superannuation required.

• Your desired lifestyle – Are you inclined towards frequent travels or opting for a more simple, cost-effective lifestyle?
• Additional income sources – Investments, part-time employment, and the Age Pension can boost your superannuation.
• Extra contributions – Making voluntary contributions can help grow your super balance over time.

Foolish takeaway

While the ideal superannuation balance for retirement will vary for each individual, having a clear goal based on your desired lifestyle is essential.

Grasping your financial requirements ahead of time can greatly enhance your chances of enjoying a stable and fulfilling retired life.

No matter whether you aspire to live comfortably or moderately, starting early with active measures can assist you in attaining higher financial freedom as you age.

The post How much superannuation will truly be required during your retirement years? appeared first on The Motley Fool Australia .

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Motley Fool contributor James Mickleboro The Motley Fool Australia does not hold any shares in the companies discussed. Additionally, Motley Fool Holdings Inc., which owns The Motley Fool Australia, also does not own positions in these mentioned stocks. Furthermore, The Motley Fool as an organization maintains no stake in the equities referenced. disclosure policy This article includes solely general investment guidance (covered under AFSL 400691). Authored by Scott Phillips.

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Annuities or Dividend Stocks: Picking the Best Path for Retirement Security

When plotting your retirement strategy, the main aim is to establish a consistent and dependable source of income that will last throughout your life. Annuities can be an effective tool for this purpose. dividend stocks There are two typical methods to accomplish this. Certain individuals nearing retirement prefer ensuring their financial stability and having a secure income stream through an annuity While some look for growth and adaptability through dividend stocks.

Grasping how these investment options function and evaluating their associated risks, expenses, and tax impacts can assist you in choosing which one aligns most effectively with your retirement strategy.

Here’s all the information you require.

How dividend stocks and annuities create retirement income

A significant number of corporations, particularly those with considerable tenure, allocate part of their earnings to shareholders as dividends. Individuals who have retired and possess these types of equities for an extended period can reap a consistent flow of revenue without needing to liquidate assets, all while potentially capitalizing on rises in share values down the line. Such growth in asset value aids in surpassing inflation rates over the course of one’s original stake.

Robust dividend-paying firms often boost their distributions annually. In the long term, this approach can be quite advantageous. reinvesting dividends Can enhance returns further, making this choice suitable if you're looking for both income and growth. Typically, most dividend-paying stocks offer income on a quarterly basis, but some pay out monthly .

On the contrary, annuities are agreements with life insurance firms that ensure a specific amount of regular income. These financial products provide a consistent payment stream and safeguard against longevity risk or the chance of exhausting your savings.

Annuities produce income via fixed interest rates or the increase from their underlying investments. Fixed annuities offer predictable payouts, while variable annuities And with index-linked annuities, their value changes according to the stock market’s performance. What makes annuities attractive is the assurance provided by the insurance company—regardless of your lifespan, you will continue to receive consistent payments.

Dividend-paying stocks versus annuities: A comparison

Payout annuities and dividend stocks each have distinct risks and trade-offs that require thorough consideration prior to determining which option best suits your needs.

• Risks

  Similar to all investments, both dividend stocks and annuities come with their own set of risks.

  One major advantage of annuities is their capacity to efficiently shift the risk of exhausting your retirement funds or experiencing declines due to market fluctuations onto an insurance provider. Regardless of whether you reach age 100 or face a downturn in the financial markets, your payments continue uninterrupted according to the conditions outlined in your agreement. For those wary of taking risks, this feature offers significant peace of mind.

  Nonetheless, it's crucial to keep in mind that the security offered by an annuity relies solely on the financial health of the insurance provider, and variable annuities may lose their worth should the markets experience a slump.

  While dividend stocks typically exhibit lower volatility compared to growth stocks, they still come with their own set of risks. The prices can vary, and you might experience potential short-term declines.

  Here’s an additional significant point to take into account: Should a corporation lack the financial means to continue distributing dividends, these payments may be reduced. Such a move could lead to a sharp decline in share value. For instance, Walgreens previously stood as a cornerstone of many portfolios. Dividend Aristocrats Here’s a list of companies that have consistently issued dividends for at least 25 consecutive years. Nevertheless, once the firm decided to discontinue its dividend payments in January 2025, the stock price—which had been struggling—plummeted below $10 per share.

  To reduce this risk and to streamline stock picking, numerous investors choose to dividend mutual funds or dividend ETFs .

• Complexity

  Annuities are notorious for being complex. The contracts can run into dozens of pages, typically filled with technical terms, limitations, and perplexing fee systems. Despite this, optional riders could include features similar to insurance, like adjustments for inflation or death benefits These additional perks come with higher expenses.

  Dividend stocks, however, are quite simple. By buying shares in companies that distribute dividends or investing in a dividend-focused exchange-traded fund (ETF), you earn regular payments. That's all there is to it. Although choosing the appropriate stocks does demand some investigation and ongoing attention, the entire investment procedure tends to be clearer and simpler compared to other types of investments. buying an annuity .

• Fees and cost

  Annuities often involve substantial fees, which can considerably affect your total earnings. The specific fees vary based on the kind of annuity selected; they may encompass administration expenses, death and expense fees, investment management charges, as well as penalties for withdrawing funds prematurely. Notably, variable annuities are particularly known for their hefty fees. high fees and commissions .

  However, certain annuities — like single-premium immediate annuities (SPIAs) — offer a more straightforward and budget-friendly choice. Payments begin within one year, however, there’s a caveat: To receive a substantial income during your retirement years, you must initially commit a considerable sum of money.

  On the contrary, dividend stocks come with significantly lower expenses. Investors typically do not incur brokerage fees when purchasing and trading these stocks, largely due to the increase in readily accessible platforms. commission-free trading ETFs focusing on dividend-paying stocks provide an affordable means to invest in a well-diversified collection of equities that generate income.

  When comparing costs and fees, dividend stocks clearly come out ahead as being more economical compared to annuities.

• Liquidity

  Aside from investing in real estate Annuities rank as some of the most illiquid investment options available. After you contribute to an annuity agreement, withdrawing your funds can often be challenging , if not impractical. Many annuities also come with surrender fees for early withdrawals, which can persist for multiple years. Additionally, attempting to access your funds before this period may result in penalties. qualified annuity Before reaching age 59½, you'll face a 10 percent tax penalty imposed by the IRS.

  These limitations might present difficulties whether you're dealing with a significant cost or just wish to diversify your investment approach.

  In the meantime, dividend stocks are very liquid since investors can readily convert their shares into cash through sales. Their flexibility makes them an attractive option for retirees who require prompt access to funds. Although selling may incur capital gains taxes, these stocks offer investment control that annuities simply cannot provide.

• Taxes

  A major distinction between annuities and dividend stocks lies in their tax treatment.

  Dividend-paying stocks, especially those that distribute " qualified dividends (by meeting certain holding period requirements), they receive beneficial tax treatment. These dividends are subject to taxation at a reduced rate. long-term capital gains rates , typically below the rates for regular income.

  This renders qualified dividend stocks a tax-effective method to create retirement income, particularly beneficial for investors in lower brackets. tax brackets .

  One important consideration is that dividends earned in taxable brokerage accounts are taxed annually, so you will owe taxes on these passive income payments every year they are received. This is why many financial advisors suggest holding dividend stocks within a tax-advantaged retirement account, like a 401(k) or an IRA. Roth IRA .

  Annuities provide tax-deferred growth, allowing your investments to increase without being taxed immediately. Nonetheless, when you start withdrawing funds from an annuity, the taxable part will be considered ordinary income. Consequently, this could lead to a larger tax liability because ordinary income tax rates tend to be higher compared to capital gains rates, particularly affecting retirees who fall into higher-income categories.

  So while you may steer clear of taxes while your funds increase within an annuity Eventually, when you withdraw funds or begin receiving periodic payments from the insurance company, you will be taxed on all of the growth (and possibly part of the principal) at your usual income tax rate.

Weighing your options?

When seeking professional advice regarding your investment management or retirement planning, ’s AdvisorMatch I can link you with a Certified Financial Planner™ who will assist you in reaching your financial objectives.

Which performs better for retirement: annuities or dividend stocks?

There isn’t a universal solution when deciding between an annuity and dividend stocks for retirement. While evaluating your choices, keep these factors in mind:

Risk tolerance

• Annuities provide assured income, which makes them perfect for retirees seeking financial stability and safeguarding their investments from market fluctuations — even if it means foregoing potentially greater earnings.
• Stocks that pay dividends involve market risks, yet they offer higher growth prospects and the ability to surpass inflation rates.

Liquidity needs

• Annuities lack liquidity and come with penalties for premature withdrawals. Consequently, they offer significantly lower flexibility compared to most other investment options and financial tools.
• Dividend-paying stocks can be readily sold whenever needed, providing faster access to funds at a reduced expense when you require liquidity.

Income preferences

• Annuities offer a consistent stream of income throughout one’s lifetime. They are frequently likened to pensions or dubbed as "replacement paychecks" because of their regular payments.
• Stocks that pay dividends can create passive income yet they remain vulnerable to market ups and downs as well as possible reductions in payouts.

Tax considerations

• Annuities accumulate without taxes until withdrawal, but both premature withdrawals and some payout amounts are subject to taxation as regular income.
• Stocks that pay dividends, especially those offering qualified dividends, are subject to taxation at lower rates similar to capital gains taxes.

Deciding between an annuity and dividend stocks doesn't necessarily have to be a completely exclusive choice.

Certain retired individuals might discover that merging these two types of investments proves quite effective. For instance, one could use annuities to handle basic living costs, whereas putting money into dividend stocks could provide extra income along with potential growth. This approach aids in crafting a well-rounded retirement plan.

Bottom line

Annuities and dividend stocks both play roles in retirement strategies, yet cater to distinct requirements. Annuities provide assured income streams, whereas dividend stocks focus on expansion and accessibility. Use annuities when prioritizing safety, and opt for dividend stocks when you prefer adaptability.

In the end, the most suitable method relies on your particular monetary circumstances. risk tolerance And long-term objectives. To make an educated choice, think about seeking advice from a financial advisor .

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3 Compelling Reasons to Start Social Security at 62

If you have spent some time researching this topic, you likely have been encouraged to postpone applying for your Social Security retirement benefits for as long as feasible. This advice stems from the fact that the designated full retirement age—when you can receive 100% of your expected payouts—is typically set between ages 66 and 67, varying based on your birth year. Opting instead to claim these benefits at age 70 could result in substantially larger monthly benefit amounts.

On the opposite end of this spectrum, though, lies another alternative. Despite resulting in significantly lower payouts, one could argue for filing as early as age 62. However, make sure not to rush into this decision, as it is an irreversible choice.

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Patience pays off

As has been mentioned, everyone who qualifies for Social Security Individuals entitled to retirement benefits will receive the complete amount they were expecting solely if they begin claiming them upon reaching their full retirement age, or FRA This year’s Full Retirement Age (FRA) is set at 66 years and 10 months for individuals born in 1959. The following year, however, the FRA will increase to a complete 67 years, remaining unchanged thereafter unless modified once more through new legislation.

However, if you decide to postpone claiming these benefits, your future payouts will increase by approximately 0.66% each month, which adds up to an annual boost of around 8%. Specifically for those attaining their full retirement age this year or next year, waiting until age 70 could result in a significant hike of roughly 25% in the amount of your monthly disbursements.

Don’t delay initiating your payments significantly past turning 70. The Social Security Administration ceases to increase your future monthly benefits after age 70, and they will only backpay you up to six months.

Perhaps you considered initiating these payments far earlier than your Full Retirement Age (FRA)? This approach is also feasible. However, doing this significantly diminishes the amount of each payment, potentially lowering it by up to 30% should you decide to start claiming benefits at the youngest eligible age of 62. Quite a hit!

The arguments for making the claim as soon as possible

Why would someone potentially jeopardize their financial stability in the long run by securing these reduced payment rates?

There are indeed several clear-cut reasons for taking this step. The primary one is that you might require this funds just to ensure basic needs like food and shelter, with alternatives such as employment or leveraging any property you own not being viable solutions at present.

Another compelling rationale for initiating Social Security benefits prior to reaching your Full Retirement Age, despite not requiring immediate funds, stems from the potential opportunity to allocate these resources elsewhere. For instance, you might consider investing them in equally secure ventures instead.

And whether good or bad, this benchmark is quite modest. Even though the actual return on your funds locked into the Social Security system fluctuates each year, it generally aligns with the country’s consumer inflation rate or matches the returns on Treasury securities. U.S. Treasury bonds .

From 2008 through 2021—when interest rates hovered around their lowest points—it was not feasible to outperform this rate of return using bonds or certificates of deposit. Now that rates have returned to typical historical levels, many money market funds offer higher yields compared to what you would generally receive from allowing the Social Security Administration to hold onto your funds before you reach full retirement age.

Keep in mind how easy and tempting it might be to avoid actually making this positive move with the money once you have it in your hands.

Another reason to consider taking Social Security earlier instead of waiting is the potential for benefit reductions due to the program nearing financial instability. Should decreased payments become unavoidable (recognizing that such concerns may be somewhat influenced by political factors), it would make sense to receive complete payments for as long as possible before they decrease.

Moreover, earning income while simultaneously receiving early benefits is also an alternative, and potentially a wise choice for many individuals.

Even though earning an income alongside Social Security benefits might decrease those payments, which contradicts a widespread belief, it doesn’t mean you’re losing out. If your benefit amounts are reduced because of wages earned from working, they will be compensated later with larger monthly Social Security payouts in the future. This option essentially lets you enjoy both worlds—you can generate earnings while also collecting benefits without enduring lasting penalties for doing so.

The first idea you came up with is probably your strongest one.

However, if none of these points seem compelling enough to persuade you that claiming Social Security benefits at 62 might be advantageous despite the costs involved? It may just be better this way. Overthinking and poorly planned optimizations frequently lead to outcomes worse than before. Typically, you’re better off utilizing such programs as they were originally meant to be used and adhering to standard practices. retirement and financial plans that have existed for many years.

In spite of that, there’s nothing incorrect about grabbing a pencil and paper to manually work through some genuine figures. For certain individuals, opting for early Social Security can indeed be quite sensible.

The $ 22,924 The Social Security benefit many seniors entirely miss noticing.

If you’re similar to many Americans, you might be lagging several years—or even more—behind on saving for retirement. However, some lesser-known “Social Security strategies” may assist in increasing your retirement earnings. For instance: one simple method could provide an additional $ 22,924 More every year! After mastering strategies to optimize your Social Security benefits, we believe you can retire with confidence and achieve the peace of mind everyone seeks. Just click here to find out how you can gain deeper insights into these tactics.

Check out "The Hidden Truths of Social Security" »

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How Much Should Your Nest Egg Grow at Each Life Stage?

Everyone understands that a comfy retirement necessitates having a substantial savings fund.

The size can vary significantly based on numerous elements such as your debt levels, overall health, and personal lifestyle choices (are you aiming for annual luxurious travels, or do you prefer more serene and low-key experiences?).

A widely accepted guideline suggests that you should aim to amass sufficient funds such that withdrawing 4% annually from your savings can sustain your desired standard of living. If you retire with $1,000,000, this would equate to having $40,000 per year for expenses.

However, despite knowing exactly how much you require — and precisely when you'll need it — you might still be uncertain about how to create a strategy to achieve this. get It—and how to maintain that plan’s progress.

However, do not worry: This guide offers a series of financial benchmarks that will clearly indicate where your finances should stand at each crucial phase before reaching that wonderful point of work cessation.

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What amount should you be setting aside?

Figuring out what portion of your earnings should go towards your retirement savings annually can be challenging, especially when you have pressing financial issues to address.

Financial services company Fidelity It recommends having saved a minimum of one year's earnings by the age of 30 and ten times your yearly salary by the time you reach 67. Here are the figures explained for you below:

• 30 years: 1 times income
• 35 years old: double the income
• 40 years old: tripled their income
• 45 years old: 4 times income
• 50 years: 6 times the income
• 55 years: 7 times income
• 60 years: 8 times income
• 67 Years: 10 Times Income

More: What does the Rule of 30 entail?

Savings for retirement during your 20s

If you've just graduated from college or university, thinking about retirement likely isn’t at the top of your list. Prioritize paying off your student loans and ensure you cover your credit card payments entirely and promptly every month to improve your credit rating. Additionally, you can monitor your credit score for free. Borrowell .

Then establish an emergency savings account in a high-interest savings account This will offer you some assistance in case of unforeseen costs, such as losing your job or encountering substantial medical bills.

Pension saving during your thirties

Once you reach your 30s, you probably find yourself concerned about paying your mortgage , tying the knot and providing for your loved ones.

Essentially, your financial well-being now involves more than just yourself, so consider getting a life insurance policy to ensure your loved ones are supported.

However, as you do this, ensure you continue to contribute to an RRSP or TFSA and expand your earnings through additional investment opportunities. By the time you reach 35, aim to have accumulated savings equivalent to at least double your yearly income for your retirement future.

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Pension saving during your forties

By this point, you ought to have a neat pile of retirement savings set aside — but if you're lagging behind your objectives, consider consulting with a financial advisor to establish a clear strategy.

This holds particular significance if you've diverted your attention from your retirement savings to concentrate on other matters in previous years. By the time you reach 45, you ought to have accumulated four times your yearly income as savings for your later life.

Keep enhancing your savings through investments and any additional income from bonuses or raises. Also, explore opportunities to reduce your typical monthly expenses, such as reassessing your insurance policies. mortgage rates .

Pension saving in your 50s

Certain Canadians opt for retirement in their 50s, and should you have saved at least seven times your yearly earnings by this age, you could also contemplate retiring.

If you're not prepared just yet, though, simply maintain your current approach. Make the most of your RRSP and TFSA contributions, look for methods to reduce your monthly expenses, and carry on tracking the stock market and making investments.

Ensure all outstanding debts are settled before retiring. If you're managing several lines of credit, this step becomes particularly important. obtain a personal loan To reduce the amount of interest paid and accelerate the repayment of your debts.

Pension saving in your 60s

When you reach your 60s, you become qualified to begin obtaining benefits from the Canada Pension Plan (CPP) and Old Age Security (OAS) starting at age 65. However, these payments alone will not suffice for covering all expenses during retirement; this is precisely why accumulating savings and maximizing contributions to Registered Retirement Savings Plans (RRSPs) has been essential over previous decades.

You could begin taking funds out of your RRSP account, making them taxable and requiring you to report this amount when filing your taxes.

Rather than employing a costly tax specialist to handle everything, opt for an online service and select a plan that best suits your financial situation and needs.

Sources

1. Fidelity: What amount of savings is required for retirement? (August 21, 2024)

This article How Much Cash Should You Have Accumulated in Your Retirement Fund at Different Stages of Life? originally appeared on Money.ca

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Should Wyoming Be Your Retirement Haven?

If you're thinking of relocating for retirement , you might be considering Florida or Arizona And you might not be considering Wyoming. However, it’s worth giving some thought to, as it boasts many attractions.

We can begin with its stunning natural scenery. For one thing, it boasts the Grand Teton National Park. People fond of hiking, biking, hunting, fishing, or skiing will find plenty to do. Additionally, the region has a notably low crime rate.

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Wyoming has been ranked as the 10th best state for retirees by Bankrate.com, excelling in terms of affordability but lagging behind when it comes to weather conditions. Winter in Wyoming often brings severe snowfall and extremely frigid temperatures. According to the World Population Review, the state’s general cost of living stands at approximately 93 percent of the nationwide average, with housing expenses being notably lower than most places. typical home price In Wyoming, the recent price was $348,066 -- nearly matching the national average -- although significantly more affordable housing options may be available based on the specific area within the state. Car insurance Meanwhile, it averages $2,393 per year, approximately $624 less than the average.

Wyoming performs admirably regarding taxation. The state does not impose an income tax, and additionally, it lacks a state tax altogether. estate tax , either.

Senior citizens, understandably, tend to be very concerned about healthcare , and Wyoming performs moderately without standing out significantly in this aspect, ranking as the 29th best state in the country for elderly healthcare according to MedicareGuide.com.

Keep in mind that Wyoming is home to abundant wildlife, yet has relatively few inhabitants. Should the constant activity of large urban centers be more your style, consider looking for alternatives. The state boasts extensive rural regions along with several smaller towns—however, compared to other states, it offers fewer opportunities for cultural experiences like visiting museums, attending theaters, or exploring art galleries.

It's wise to dedicate at least several months to living in any place you're considering, ensuring it suits your lifestyle well. your overall retirement plan .

The $ 22,924 The Social Security benefit many seniors fail to notice.

If you’re similar to many Americans, you might be lagging several years—or even more—behind on your retirement savings. However, some lesser-known “ Social Security tips” may assist in increasing your retirement earnings. For instance: one simple strategy could earn you an additional $ 22,924 More every year! After mastering strategies to optimize your Social Security benefits, we believe you can retire with confidence and achieve the peace of mind everyone seeks. Just click here to find out how you can gain deeper insights into these tactics.

Check out the "Social Security secrets" »

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How Much Superannuation Should You Have by Age 50?

If your goal is comfort, retirement , you will undoubtedly be looking to conclude your career with as much superannuation  as possible.

However, what should you possess upon retirement? Similarly important, what should you have achieved financially by the age of 50 to guarantee you'll amass the necessary superannuation funds when you finally decide to retire?

Let’s see what the superannuation sector suggests for tomorrow’s Australian retirees.

What quantity of superannuation funds would be appropriate for me?

To start with, we should determine the amount required for a comfortable retirement.

Based on the ASFA Retirement Standard from the Association of Superannuation Funds of Australia, couples aiming for a comfortable retirement require approximately $690,000 in their superannuation fund. For single individuals seeking the same level of comfort during retirement, this figure stands at around $595,000.

AFSA outlines comfortable retirement in the following manner:

The comfortable retirement benchmark ensures that people can sustain a high quality of life after they stop working. This includes covering basic needs like food shopping, transportation, and house maintenance, along with having personal health coverage, engaging in various physical and recreational pursuits, and enjoying meals out occasionally. Crucially, this standard supports staying socially engaged—both online via digital means and offline with at least one local vacation each year plus an overseas journey every seventh year.

If you're content with a basic lifestyle after retiring, approximately $100,000 in superannuation would suffice for both partners and individuals once they turn 67 years old. According to AFSA, a simple retirement entails the following:

A moderate retirement budget aims to provide a living standard somewhat higher than what the Age Pension offers. This enables retirees to cover essential healthcare costs along with occasional physical activity, entertainment, and gatherings with loved ones. These estimates presume that retirees fully own their homes and maintain good health.

I am aware of the kind of retirement I would rather have.

What are some things I ought to accomplish or acquire by age 50?

According to BT Funds Management The typical superannuation balance for individuals aged between 50 and 54 years old (both males and females) stands at $215,118.

If you're 50 years old and have reached this savings level in your superannuation fund, give yourself a congratulatory pat. You’re making great strides toward enjoying a comfortable retirement.

For instance, if you were to compound Starting with a balance of $215,118 and achieving an average annual return of 7.5% over 17 years, your final balance would be around $735,000. This amount exceeds what’s needed for a comfortable retirement.

However, what if you find yourself lagging behind? Should you fall short, it might be beneficial to think about contributing additional funds to your superannuation account annually within your means. Each contribution makes a difference.

Furthermore, consider investigating how your fund measures up against similar ones. Even though previous performance doesn’t guarantee future outcomes, if your superannuation fund appears to regularly lag behind others, it might be worthwhile switching to an option with stronger historical results.

The post What level of superannuation savings would typically be expected at age 50? appeared first on The Motley Fool Australia .

Is putting $1,000 into the S&P/ASX 200 a good idea at this moment?

Prior to purchasing S&P/ASX 200 shares, keep these points in mind:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks For investors looking to purchase at this moment... and the S&P/ASX 200 was not among those recommended.

The online investment service he has been running for over ten years, Motley Fool Share Advisor, has offered thousands of subscribers stock recommendations that have doubled, tripled, or even quadrupled in value.*

Right now, Scott believes there are 5 stocks that could potentially be smarter choices for investment.

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Motley Fool contributor James Mickleboro The Motley Fool Australia does not hold shares in any of the companies mentioned. Additionally, The Motley Fool Australia’s parent company, Motley Fool Holdings Inc., also does not own stock in any of these companies. Furthermore, The Motley Fool as an organization has no stake in any of the stocks discussed herein. disclosure policy This article includes solely general investment guidance (covered under AFSL 400691). Authorized by Scott Phillips.

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Should Canadian retirees own or rent their home? Use this simple ‘5x5x5 rule’ to figure it out

Faced with the rising cost of living, many American retirees are looking to control one of the most fundamental expenses: housing.

Since the pandemic, the cost of housing has remained stubbornly high. According to a recent report , home affordability slipped further in January, as rising prices raised the income needed for a mortgage in 12 of 13 major markets.

Moving is not easy at the best of times, but for retirees, deciding whether to rent or own their home will have a long-term impact on their finances and their lifestyle. To help clarify whether renting or owning is your best option, retirement author and YouTube host Geoff Schmidt advises following what he calls the 5x5x5 rule.

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About the 5x5x5 formula

The 5x5x5 rule is a way to gain clarity on your decision to move by breaking down the pros and cons of renting versus owning both short- and long-term. Most importantly, retirees need to consider where they’ll be — not just geographically speaking — 10 years down the road. Here’s a breakdown of each of 'five' in the 5x5x5 rule.

5 pros of ownership

The first step in deciding if you want to buy a new home as a retiree is to think about the five big perks of having your own property. For retirees, the pros of owning a home allow you to:

1. Build equity in your home : Each mortgage payment you make brings you closer to owning your house free and clear with no payments. If you can buy a new home or condo outright by selling your current home, you can still build equity in your new dwelling over time.
2. Predictability : If you have a fixed-rate mortgage, your mortgage payments will remain consistent for years and you don't have to worry about a landlord ever making you move.
3. Tax benefits : While mortgage interest and property taxes are not tax-deductible on a principle residence, you could find tax deductions if you use a portion of your home for a home-based business or to rent out as short-term accommodation or to a long-term tenant.
4. Customization You aren't required to get a landlord's approval to make alterations and enhancements to your property.
5. Home appreciation Homes typically appreciate in value over time, allowing you to boost your net worth through property ownership.

5 pros of renting

Leasing comes with five notable advantages, especially beneficial for retired individuals seeking more flexibility to explore and relocate—possibly nationwide or overseas. These benefits include:

1. Extreme flexibility You can vacate your property after providing notice and head anywhere you please far more readily compared to dealing with an illiquid home that needs selling beforehand.
2. Lower upfront costs You only need to pay the first and last month’s rent plus a security deposit to move into a rental, rather than making a substantial down payment like you would for purchasing a home.
3. No maintenance concerns If something gets damaged, your landlord has to cover both the repair costs and the expenses for actually fixing it. There’s no need for you to set aside money specifically for maintenance emergencies.
4. Predictable expenses During your lease period, your monthly housing expenses, which include utilities, will stay the same, regardless of increases in energy prices, for instance.
5. Lack of worry If you live in a rented apartment, you don’t have to worry about shoveling snow, cutting grass, or handling other aspects of exterior maintenance.

5 factors to consider when deciding between renting or buying

The final step of the 5x5x5 rule involves taking into account particular factors that impact you directly. These encompass:

• Financial stability When evaluating your present and anticipated Canada Pension Plan (CPP) benefits along with your retirement income, would leasing property prove to be more financially viable over time compared to purchasing one?
• Lifestyle preferences Consider what constitutes a good quality of life for you and what truly matters. It could be prioritizing proximity to family members. Alternatively, maybe having convenient access to facilities such as healthcare services and recreational activities is important to you. Are you leaning towards stability or adaptability? Out of purchasing versus leasing, which one aligns better with your preferences?
• Current and future health : Are you in a position to maintain your home and does it have aging-in-place options?
• Estate planning : Do you want to have a home to leave as an asset to your loved ones?
• Market conditions : Is it a good time to buy a property? What do you think will be happening in the real estate market in the next decade?

By asking yourself these detailed questions about your own personal financial goals and lifestyle preferences, it will be easier to decide whether to own or rent now and in the long term.

@plaacement()

This article Could Canadian seniors opt for owning or renting their house? Apply this straightforward '5x5x5 guideline' to determine which might be better. originally appeared on Money.ca

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The content of this article serves solely as information and must not be interpreted as advice. It comes with no guarantee or warranty whatsoever.

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