Save for a pension insurance or pay off a property?

Is it still contemporary at all to contribute to a pension insurance for old-age provision? Opinions have been divided on this for several years now. The fact is that upon transition into the retirement years, a large portion of monthly income disappears, which must be absorbed by adequate monthly liquidity flows—meaning alternative monthly cash inflows—in order to close the pension gap.

Real estate for wealth accumulation and retirement provision

pension insurance and Real estate are two important investment options for people planning long-term for their retirement provision. Both have their own advantages and disadvantages, and the choice between the two options depends on the individual needs and goals of the investor.

An annuity insurance is a type of insurance that guarantees a regular pension in old age. It typically requires regular contributions during one's working life, and the amount of the pension depends on the contributions and the terms of the insurance contract. A major advantage of annuity insurance is that it is generally tax-deductible. This means that contributions can be deducted from taxes, which reduces the burden on the investor. In addition, there are often statutory pension insurances that contribute in addition to the private insurance.

On the other hand, real estate is a tangible investment, a physical asset owned and used by a person or a company. Real estate can be used as an apartment or a house to Owner-occupancy be used, but also as commercial used space or as Capital investment. A major advantage of real estate as an investment is the opportunity to through rental income regular source of income to create. In addition, there is the Appreciation which can additionally benefit retirement provision.

When buying real estate, it is important to pay attention to its rentability. Furthermore, many different factors must be considered in order to benefit from an increase in value. Location plays a crucial role in this, because real estate is a long-term investment. When purchasing real estate, buyers must also factor in higher costs for the notary and real estate transfer tax. In addition, real estate requires a higher commitment of equity capital than is the case with an annuity insurance policy.

Real estate purchase as a hedge against inflation

When it comes to the question of what to do, we know the old country wisdom:
„Money is like manure. If you pile it all in one place, it stinks.
However, more broadly diversified, it sustainably bears ripe fruit!“

Have you ever noticed that pension insurance has continuously lowered its guaranteed interest rates over the past twenty years, and in the meantime also its surplus returns? Have you noticed that in the annual statements, the potential monthly pension regularly turns out lower than in the previous year? Unfortunately, this is not positive news for retirement provision if you rely solely on pension insurance.

On the other hand, you will certainly have seen that the Rents for residential properties have risen steadily over the last twenty years are. Thus, increasing the rental yield is always just a matter of the investment period. Also exciting is the fact that money has lost more and more value over the past twenty years, while real estate has increased in value. Simply put:

After twenty years, a real estate loan of €100,000 that still exists is generally worth less than the property bought with it twenty years ago for €100,000, which may be worth significantly more today.

The decision between a pension insurance policy and real estate depends on the individual needs and goals of the investor. It is important to be well informed and to consider the decision carefully. A combination of both investment forms or advice from a financial advisor can help in making the best possible decision.

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Benefits of real estate as retirement provision

A real estate property as provision for old age has numerous benefits. One of the greatest advantages is the possibility of creating a regular source of income through rental income. This can be especially important if the statutory pension is not very high, because the rental income helps maintain one's standard of living in old age. Another advantage of a property is the potential for appreciation in value. Real estate is generally inflation-proof and can increase in value over time. This means that in old age, one has the option to sell the property at a higher price than the original purchase price. As a result, one benefits additionally and also has a larger sum of money available.

Real estate can also serve as a so-called financial anchor in old age. Owning a house or an apartment can help ensure that one independent and self-determined in old age can live. One does not have to worry about termination of a lease for personal use or potential rent increases, but can enjoy homeownership. Preferably, the loan should be paid off before retirement so that monthly expenses remain manageable. The crucial factor is that the property's structure is barrier-free and well-suited for living in old age overall. This makes it possible to live comfortably within your own four walls for as long as possible.

In addition, real estate can be inherited, allowing wealth to be passed on to the next generation. It is important to be well-versed in the legal regulations regarding inheritance tax and to consult a professional in good time.

In summary, real estate as retirement provision has many advantages and is a promising way to secure oneself for the long term. They offer the possibility of rental income, appreciation in value, security in old age, and a way to pass wealth on to the next generation. It is important that the property meets your individual needs and goals. Furthermore, it is advantageous to consider other investment options as well and to pursue a balanced and diversified investment strategy in order to minimize risk and increase the chances of successful retirement provision in order to enjoy the highest possible standard of living in old age. The crucial thing is to start building wealth as soon as possible. This applies particularly to the acquisition of real estate. This makes it possible to ensure that the property is paid off before retirement.

Our tip for you: Make sure to add real estate to your wealth accumulation.
Do you have questions about how this works and which properties are suitable for you? Please feel free to contact us.. We look forward to hearing from you and will be happy to advise you.

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