20% below the breadline or 358% increase – you choose.

October 24, 2006 by MargaretCollins
Filed under: Wealth Coach Diaries 

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Margaret says:

Whichever way you turn there’s plenty of news to be had, good, bad or indifferent. Must be something about getting closer to 50 that suddenly makes me notice anything in the news that mentions retirement, pensions or both.

Several stories caught my eye today. I was surprised to learn that it is termed "news" that more than half of today’s home owners consider that their property is a major asset that will support them in their retirement. I mean, doh!!!!!

I don’t know how many of you have invested your money in a pension… surveys suggest that not very many of you have if truth be told! I heard someone this week explain how he felt when informed that a regular saving of £300 a month for 35 years is predicted to generate a massive …

£4,500 a year income in his retirement!!!

So why would we positively choose that option?

OK, so most of us see the equity in our property as coming to our rescue as our pensions underperform.

Having said that, the same survey revealed that apparently, "the average person", doesn’t expect to have paid off their mortgage until they reach 57 years of age while 1.6 million homeowners still expect to paying their mortgage at age 65.

And then, just to burst the very fragile illusion of security or financial freedom, apparently we can look forward to the upset that comes from enforced downsizing as we release equity, sell our homes and move into a smaller place AND the stress of selling our children’s inheritance.

I could tell this writer had never been on a passive investments open day!

Just a few columns away there was an article about UK pensioners. One in five – that is more than 2 million people – are currently living below the official breadline after they have made their rent or mortgage payment. And do you know what that breadline is? It’s less then £98 per week if you’re on your own or £178 if you are a couple. Now that’s not exactly the luxury I had in mind for my own retirement!

So how is it that so many people have ended up in this situation?

Each person has their own story to tell and no two will ever be quite the same but I bet that a major theme running through most of these personal histories would be that they’ve never learned the value of property or how to use it as an investment rather than just as a home.

Now that’s not a criticism of them – I’ve only learned the secrets myself relatively recently but even people who should know better seem to have missed the point. If the "High street banks" are happy to lend you money secured on your property then it’s safe to assume that they consider your property to be a very secure investment.

I remember buying my first home back in 1987. Started out with a 6.4% interest rate that within 18 months had risen to 14.7% interest. Yes, fingers slightly singed, belts firmly pulled in but I managed to pull through and hang on to my home.

And now, even through that very painful time when it seems that interest rates soared and property prices plummeted… the truth is that a property purchased in 1985 would have increased in value by 385%… that’s a £60,000 house in 1985 being worth more than £250,000 today, despite the "property crash".

Now the chances are, if you’re reading this blog you’ve probably educated yourself about the value of property… haven’t you…

If you haven’t "got it" yet, there’s still time to get to a passive investments Open day. It really is the easiest way to get high quality information without any high pressure sales. If you’re not geographically close at least read their website or get a good book - Andy Shaw and Peter Stanley have both covered these principles.

Don’t let a lack of education be your excuse for living on less than £98 a week!

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