One in 30 relying on their homes to fund their retirement

8th September 2023

New research by Saltus has found that one in 30 respondents are planning for their home’s value to fund 100% of their retirement, while on average, respondents said they expect their property to provide funding for almost half (44%) of retirement

Megan Jenkins Partner and Adviser at Saltus said “While historically, property has proved to be a fairly solid investment – which is why so many people think their property will be their “pension” – this is not the wisest move”

“Firstly, and most importantly, diversification is key.  Any investor should seek to ensure that their portfolio is diversified so that it is not subject to any one risk factor.”

“If you are solely reliant on one asset as a significant portion of your retirement provision and that asset were to crash or fall in value, you have no backup.”

“Property is one of the least liquid assets you can own. If you are looking to downsize to release funds, you are relying on being able to release enough spendable capital at the right time to fund your retirement.”

“The main risks here are, firstly, that the cost of buying your new home does not leave as much as you would hope to live on, secondly, that you may be forced to sell at a lower cost than you had hoped and thirdly, not being able to sell at all in the current market, meaning not having access to the capital when it is needed.”

“Just like investing in any other asset, if you don’t have a plan B when relying on property values, you may be forced to sell at an inopportune time, or indeed unable to sell at all.”

“The other risk, of course, is that you don’t want to sell – the reality is that people become very attached and comfortable in their family home meaning it is never the right time to downsize.”

“If you are looking, for example, to downsize to fund your retirement you should look to do this in plenty of time – the house buying and selling process can be a long one, particularly in a slow market – so it is important to downsize well in advance of when you actually need the funds.”