The Role of Real Estate in Retirement Planning

May 16, 2023

An older adult examining a document titled “retirement plan.”

Most people look forward to retirement. But it can also be a time of financial uncertainty for some people, and that’s no fun. 

In a study conducted by AARP, more than half of retirees and pre-retirees in the United States are concerned about outliving their previously saved retirement funds. Of those, 47% fear losing their money in a market downturn. 

Although these fears aren’t unfounded, there are ways to combat them. 

Real estate investments, in particular, can be a highly beneficial asset for retirees, especially during times of economic instability. However, these investments must be used wisely if retirees plan on relying on them for income.

What Are The Benefits of Real Estate in Retirement Planning?

Whether retirees decide to downsize and use the spare funds from the initial real estate funds or invest in a rental property, there are plenty of ways for retirees to benefit financially. Here are just a couple of benefits you may expect within real estate while planning for retirement.

Inflation Protection

Inflation can have a significant impact on people’s retirement planning. As the cost of living increases, the money in savings and fixed-income investments might be worth less. This gives retirees less purchasing power, which can also translate to a decrease in their standard of living. In many cases, this makes it harder to cover essential expenses like healthcare and housing. Unlike fixed-income investments, real estate investments have the potential to appreciate over time, which can help offset the effects of inflation.

Income Generation

Rental properties can provide a stable stream of income that requires minimal effort, making it an attractive option for retirees looking to supplement their retirement savings.

This income can be resistant to economic instability, as rents tend to increase during times of inflation. Passive income from real estate investments can be further enhanced by selecting the right type of property and managing it well.

Tax Benefits and Deductions

According to Rocket Mortgage, real estate investing can offer tax benefits that can help investors mitigate losses if their property depreciates, including: 

  • Interest deductions: Taxpayers can deduct the interest paid on their mortgage and significantly reduce their tax bill. Investors can also deduct property taxes paid on their rental properties. Both of these benefits can help offset the cost of owning and maintaining the property.
  • Depreciation deductions: The IRS allows investors to deduct a portion of the cost of their rental property each year as a depreciation expense.
  • Repair and maintenance deductions: Investors can also deduct the cost of repairs and maintenance performed on their rental properties. If an investor needs to travel to their rental property for business purposes, they can deduct that cost. 

All of these tax deductions can help real estate investors mitigate losses if their property depreciates. For example, if a rental property loses value due to market conditions or other factors, the investor can use depreciation deductions to offset the income generated by the property, reducing their overall tax liability.


The best way to stay afloat during unstable economic times — especially if you’re building retirement funds — is to build a diverse financial portfolio. On the other hand, if you rely entirely on one type of investment, you’re more likely to see serious depreciation if this investment crashes with a change in the market. Investing in real estate is a great way to diversify your portfolio, as these investments tend to perform differently than other, riskier types of assets.

During periods of economic uncertainty, real estate investments may not decline in value as much as stocks or other financial assets. 

Real estate investments also provide a tangible asset that can be used as collateral. Therefore, it’s easier to source secure finances for other investments or cover unexpected expenses. This can be especially useful for retirees who may have limited income sources and need to access cash quickly.

What To Consider Before You Invest

While investing in real estate can offer many benefits, it is not feasible for everyone. Before deciding if a property is right for you,  there are several key factors you should consider.


Location plays a big part in determining how much a property is worth. According to Open Door, the desirability of a location can significantly impact the price that a property can fetch in the market. When evaluating a property for its potential earnings and desirable location, look for its proximity to schools, parks, shopping centers, and public transportation. 

In addition, see if there are any HOAs that may have a certain standard for property maintenance. HOA dues may get pesky, but these associations also ensure the neighborhood stays desirable in the eyes of the market.


According to Wall Street Mojo, several factors can impact an investment property’s valuation, including expected income generation and the sales prices of comparable properties in the area. How much rental income a property generates is another consideration when it comes to determining its value.

The condition also impacts the value of a property, along with the sales prices of comparable properties, plus the state of the real estate market. The financing terms can also impact its value.

Your Own Budget

Before investing in real estate property, your finances should be addressed. Consider the down payment you’ll need to cover the purchase of the property, and any minimum monthly mortgage payments. Also, don’t forget to estimate maintenance costs and repairs. If you plan on turning this investment into a rental property, you can subtract this from the rental income you might bring in.  

Finally, consider your other debts, expenses, and the overall condition of the market. In a hot market, properties can command higher prices, making them less affordable. In a slow market, properties may sell for less, making them more affordable.

Your Long-Term Goals

The first step in evaluating a real estate investment is to define your long-term goals. Consider how much money you actually need to retire comfortably. Consider how much you’re willing to sacrifice for these goals. 

Then, assess the potential returns of the investment and the level of risk. This includes considering the potential for market volatility, the potential for loss of capital, and other risks associated with the specific investment.

Making an Informed Decision

Investing and retirement planning can be complex, so ensure you’re making an educated decision by working with a trusted sponsor. This process is essentially called sponsored investing when a team of investors will compile funds to purchase real estate properties together. They’re responsible for finding and managing the investment property, while investors receive a share of the rental income and potential profits from the property sale.

Sponsored investing can be especially beneficial for retirees. By working with a sponsor, retirees can leverage the sponsor’s expertise and experience to make informed investment decisions. Additionally, sponsored investing can offer diversification benefits and potentially higher returns than other investment options.

When evaluating those you’re considering for sponsors, look at the types of properties in their portfolio. You should also pay attention to the success they’ve had with investments. A sponsor’s track record of meeting or exceeding performance targets is another good indicator of how much you’ll be able to benefit from working with them. 

Finally, consider any fees or expenses that might be associated with the investment. Reviewing the sponsor’s legal and financial disclosures can also help you ensure that they are transparent and will comply with all regulations.