Money: Renting a Davis Apartment Can Help You Retire Before 75
Halloween is over but here’s a financial scary story for many Millennials, NerdWallet’s research finds that the average retirement age for new grads is now pushed back to 75 (see the graphic below and read the story at the link). The article, again well worth the read, suggests that recent grads live at home for as long as possible to shore up their savings (retirement and emergency fund) while paying off their student loan debt as quickly as possible.
Renting a Davis CA apartment as part of your investment plan: In Davis, CA living at home only works if your parents, you know, live in Davis. For most Davis residents that means either buying or renting. There are some real estate markets where buying your home makes sense. Davis, CA isn’t one of those markets (unless you know you’re going to stay over seven years in Davis).
For most prospective residents, Davis, CA is a renters’ market. Here’s how renting a Davis apartment helps you retire early: You make compound interest your ally instead of your enemy.
Price out the cost of buying a home in Davis, add all your mortgage, insurance, property taxes and maintenance costs and come up with a monthly figure. (Sometimes those additional costs add up to another 50% over your mortgage.) Then price out the rental price of a Davis apartment. Take the money you save by renting and put it toward your savings’ goals. If you can set it up as an automatic funds transfer from your paycheck, even better. By putting the pre-tax money you save by renting into a savings retirement account, you’ll get automatically get a lower tax bill.
If you buy a Davis house, you can’t be guaranteed it will increase in value because of a variety of factors out of your control. But if you put the excess money you save by renting a Davis apartment into a very timid stock portfolio you’ll historically get an average of 6% a year. Still too risky? Pay your student loan debt faster and you’re guaranteed to make at least the interest rate (around 5% today). Over the course of loan that can mean saving almost $12,000, if not more.
Of course, we hope that if you’re looking for a Davis CA rental, you’ll choose Tandem Properties but even if you don’t, we want you to make wiser Davis housing decisions. In Davis, rent and then invest your savings. Hopefully, we’ll see your retirement party before 75.