Everything You Need to Know About Retirement Investment

When you’re building a retirement investment plan, it’s important to consider the assets that can best deliver over the long term. You need to consider that you’re going to be holding on to this asset for potentially 20+ years so using an investment vehicle that can build value over time is extremely important.

This is what makes property very appealing for building a retirement investment plan – it has the potential to build rising rental returns over the long term while increasing in overall value.

Theoretically, a property can pay for itself by using the rental returns to pay the mortgage, which means it will eventually deliver pure profit. It is this – combined with the potential to sell at a much higher value – that makes the asset so viable as a retirement investment vehicle. If you invest early enough, by the time you hit retirement age you could have a very high-performing property portfolio.

Before making any investment, you need to explore the different strategies and tactics on how you can create a comfortable retirement or even early retirement through Buy-to-Let property investment.

When planning your retirement investment, the most important consideration is time. Ideally, you want to start planning and investing as soon as possible, so that you can maximise the strength of your returns.

At the same time, you need to understand the ‘retirement number’ that you’re going to need. It’s one of the key questions that sits at the heart of any retirement plan and can dictate your actions going forward.

One of the most simple methods is ’75 – 85′, which believes that if you want to live comfortably during retirement, you need to have between 75% and 85% of your salary per year.

There are many different ways of working out your retirement number, so find one that works for you and adopt that into your long-term planning.

A key part of planning your retirement investment is how you plan on funding it. If you require a mortgage, you’ll need a specific buy-to-let product. However, this can be tricky depending on the age that you’re investing.

While this will be a less significant problem if you’re investing early, some retirees may need to shop around for buy-to-let mortgage products aimed more at older borrowers.

That said, retired property investors may look to use the 25% tax-free lump sum that can be released from their pension to part or fully fund their property investment. If this is an avenue you’re considering, it’s very important to seek professional advice on how best to structure the investment in the most tax-efficient way.

In any case, ensuring that you’re budgeting correctly is vital. This is where using a budget calculator can be useful in building a long-term strategy and give you ideas of what you need to save to achieve.

There are several tax-related considerations when investing in buy-to-let property for retirement investment.

The main consideration is Stamp Duty Land Tax on second homes. On properties worth between £40,000 and £250,000, you will have to pay 3% Stamp Duty Land Tax, which rises to 8% for properties valued between £250,000 and £950,000. Please note that these rates are only applicable to second homes in England and Northern Ireland: for Welsh and Scottish retirement investment properties, the rates will be higher.

Depending on other income streams an investor may have, any profits made on renting out property will be taxed at the appropriate rate. If the property is sold, the profit would be subject to capital gains tax.