My husband and I have bought rental property with the intention that it would help us when we retire, either by selling it or as an income stream.

There are always articles about how much you need to have to retire. We have invested money in these properties, so how do we incorporate them into the retirement figure? Thank you.
Dennis and Laura

El Paso, Texas

Dennis and Laura,

Rental income is appealing to a lot of people because it’s almost like getting a paycheck every month — as long as you have a tenant. If your property is sitting empty, you’re not earning any money, and in fact, you may very well be losing it.

That’s why relying heavily on rental income in retirement — or the ability to sell the rental property — is a little bit of a risky proposition, but one you mollify with a diverse portfolio.

As we’ve seen from this market, it isn’t always easy to find a tenant. Nor can you count on being able to sell when you want or need to.

That said, having rental income can be a great way to supplement other investments. It will allow you to draw less from your retirement accounts each year, meaning that money has longer to grow.

Most
retirement calculators that you find online (financial institutions and the big personal finance magazines almost always have them on their Web sites) will allow you to plug in any income you expect to receive in retirement. They’ll then take this, as well as any Social Security benefit, into account when they calculate how much you need to save and how much you will need on a monthly basis to maintain your lifestyle. I’d recommend plugging your numbers into one of these tools.

next question