What to do? Buy a house or save for retirement?
The most important investment decision a professional faces is: whether to save for his/her retirement or to go for a home? While owning a home remains the biggest dream of any individual, if you do not have access to traditional pension means, then life post retirement is something you need to concern yourself with.
Home budget is usually the biggest liability in one’s personal balance sheet. Home loan repayment on an average consists of about 40% of your monthly income. If you are faced with the dilemma to choose between buying a home or saving for retirement, then it may prove to be a complex one to work your way out.
Let us weigh both the options here.
Buying a home
Home is usually the most desired possession of an individual. To buy a home for oneself means creating a shelter for yourself as well as for your family. Owning a home also saves amount you dish out as rent per month. If one talks of post retirement savings, home can be useful investment even in your post retirement days. Reverse mortgage can guarantee good returns and you can lead a comfortable post retirement life.
The ever rising price of property market makes it even a stronger case to make owning a home your first investment decision. Above all, buying a home is associated with more cultural values than an investment decision as you would like to invest in a house as there are social values and expectations associated with it.
Investing in real estate may be more fulfilling than investing in financial instruments as the former gives the feel of investing in concrete, physical asset. Recent meteoric rise of home prices have made buying properties an inevitable first choice for a employed professional. Property prices in cities have continued to rise at an average of 10%-12% even during 2012, when the real estate sector in India has been struggling due to inflationary pressures plaguing the economy and sluggish home sales.
Retirement savings
Retirement savings is hard reality the foreshadow of which you have to face, especially when you work in private sector and do not have traditional means of pension savings at your disposal. The foremost reason why buying a home should take a back seat than putting your savings into retirement account is that if you are in a job that requires you to be moving from one city to another, then it may not be the right time for you to buy a home.
If you are in a transferable job, then buying a home means you would have to rent it out. However, the rental values may not go up proportionately as the property price moves up. You may invest the the money payable as down payment in bonds and securities and rear a possibility of earning much more than the rent you would be earning.
If you are starting out your career, then you can consider living in suburban locations or outskirts of a metro, where the rental is lower and land prices are high.
The decision that you need to take is how long you should defer saving for retirement so that you can accumulate enough down payment to buy a house. However, you should also ask yourself whether even after accumulating enough down payment, will you be able to handle the ongoing costs of owning a home without jeopardizing your current financial security.
Related Real Estate Articles:
Resale property offers benefits to home buyers
NRIs increasingly seeking property in Delhi
Property buying tips for single women
Image courtesy of jscreationzs at FreeDigitalPhotos.net
