How can you invest wisely to enjoy retirement?

How can you invest wisely to enjoy retirement?

Retiring at a reasonable age and having enough saved to live comfortably is becoming an ever-distant dream for some

How can you make sure that you have enough savings to enjoy a comfortable retirement? To support a reasonable level of income in retirement, around 10-15% of annual income should be saved, yet few people maintain this level. So, the question is, why is there such a gap between what we need when we retire, and what is available to us? Furthermore, how can we ensure we have enough to enjoy our twilight years.

Pensions and retirement – the funding gap between what we have and what we need

One factor that affects the capacity to sustain ourselves through retirement, is that we are living far beyond the years the pension was designed. In 1960, if the average individual would retire at the age of 65, they would usually live another 6.1 years on their pension and savings. In 2015 those who retired at the age of 65 would live another 16 years beyond that to just over 81 years old. This longer period influences how much the government can afford to pay out via pensions, especially as public funds are already stretched.

There is also a gap between what we need to live comfortably, and what we have saved to live comfortably. This issue mainly affects women, as their retirement balances are on average 30-40% lower than their male counterparts. The problem would be far less severe if the age at which we retire increased in correlation with a longer life expectancy. Yet, that is not the case, and in some countries, such as Poland, the age of retirement is falling.

The gap between what we need for retirement and what is available is widening and is compounded by our increased life expectancy. There is also a falling birth rate, which is then affecting how many people of working age are available to support those of retirement age. In 2050 there will be 4 workers per retiree, compared with 8 today.

There is a lack of knowledge surrounding pension plans and savings. This means that employees may be opting for a basic company pension plan that does not cover them for the future. Coupled with the rise in the number of casual / self-employed workers (globally over 50% of the workforce) who are the least likely to have a pension plan in place, widens the gap.

So, how can we build a nest egg for retirement? 

Those who have bought shares or put money into a savings account for retirement might find that the interest they are receiving is not enough. Returns on these types of investments are running at historic lows, sometimes 1%. As we listen to our clients who have invested, building equity to supplement their pension was one of their main motives. One of our investors, Patricia Readshaw, commented “I was coming up to retirement and you cannot simply live on fresh air. You must have savings to fall back on for security. It is worrying when you don’t have a lot of savings set aside. Especially if you are by yourself”.

This is where retirement home investments are gathering momentum. As we have mentioned, people are living longer so the need for care homes is more pronounced. This results in excellent occupancy rates, and the caveat of a luxury retirement home is that it attracts self-paying residents, which in turn makes it a more profitable business model compared to care homes.

Why invest in a retirement home? Income for now – accommodation for later 

People who choose to invest in care homes can achieve returns of 10% per annum, assured for ten years. The cost of a suite in a retirement home is dependent upon its location, with the south west running at a slightly higher entry point. Investors can expect to pay in the region of £60,000 – £85,000. Our care home investment opportunities are primarily based in the south west region. This is because the south west is popular with retirees due to its scenic countryside and mild climate. It also boasts a high proportion of self-paying residents; an ideal demographic for those wishing to make good returns on their investment.

These care homes are often set in picturesque towns and villages, often by the coast or next to National Parks / Areas of Outstanding Natural Beauty. There is even an opportunity for the investor to occupy their own unit, so it is an ideal choice for someone who is thinking of downsizing. According to research carried out by Demos, 33% of the 1500 over 60s they surveyed would like to downsize. A quarter of those had an interest in buying retirement housing. 25% also said they’d rent one on an assured tenancy.

Investors can buy a unit, rent it out for some income and then move into the unit in later life. Or they can use the rental yield to cover rental costs at another care home. This helps spread equity as they can leave their family wealth instead of having it hoovered up by inheritance tax.

It’s also a very hands-off investment, as we understand those in their later years do not want the stress of managing a property and tenancy issues. This is all taken care of by the management company, so it suits those entering retirement.

Personal Use

Downsizing can be a stressful; leaving the house that you have created so many wonderful memories in is difficult. When making the next move and choosing a retirement home to live in, one must conduct a lot of research. It is recommended to visit many retirement villages before making any decisions. It is the sense of community and provision of extra services that one is seeking from a place they will be spending well-deserved leisure time in.

The activities provided by Carlauren developments include wine tastings, country walks and fine dining experiences. The chef has experience working for top names such as Antony Worrall Thompson and Michelin-starred Castle Hotel in Taunton. At 25 he had a head chef position to run its Brazz restaurant. All the produce is locally sourced, and residents can cultivate the gardens where the ingredients are grown.

In addition to having the investment option, as the owner you can choose to move into the retirement home (provided you are over 65). On site you enjoy the social events hosted by the company, the picturesque grounds and a luxurious living environment. Care plans centre around the individual. The aim is to allow residents to enjoy as much of their independence as possible, whilst ensuring they know help is at hand if they need it. The facility will be fully staffed by an experienced team of care professionals. They all have frontline experience as healthcare assistants and senior healthcare assistants in dementia and specialist mental health care facilities.

The benefit of investing in the luxury retirement homes provided by One Touch Property is that one can choose the hands-off 10% net rental income over a ten year commercial lease, or occupy the unit. The ability to self-occupy the suite opens the wider market for resale and allows for capital uplift (the developer must buy the property back from the owner with up to 25% uplift).

These investments are usually conversions of Grade II listed buildings based in idyllic areas of the UK such as the south west and the Isle of Wight. Prices start from £69,950 depending on the location, and the facility is fully managed meaning that the investor does not have to concern themselves with the day-to-day upkeep of the suite.

Download our luxury retirement home investment guide today to discover the benefits of investing in this robust sector, or visit our website to receive current property investment advice.

This article was sponsored by One Touch Investments