Do you plan to retire this decade? The baby boomer generation is estimated to retire at a rate of approximately 10,000 individuals per day. For many, retiring means becoming a full-time grandparent, traveler or volunteer. For others, it may mean learning a new hobby or just relaxing with some golf after a long, demanding career.
But, with the days of employment coming to an end, new financial adjustments are needed.
Many retirees retire without the security of traditional pension benefits. Most future retirees rely on social security and taxdeferred savings accounts such as a 401(k)-retirement plan to meet their everyday living expenses. This means everyday living expenses must be paid with after-tax resources.
The average social security retirement check is $1,411. This means that nearly everything must be paid with it, which is typically not enough to cover the necessities and cost of living in most major cities. And, if the person hasn’t paid their home off, that amount may not cover mortgage payments.
Homeowners have many options when looking to secure a financial future for retirement. But, many do not realize that installing solar for your home can be one of the smartest retirement options available. It simply stretches your retirement funds further.
Solar is an Investment
Investing in stocks, bonds and mutual funds exposes retirement investment funds to valuation fluctuations, which can wipe out a large portion of retirement funds. In addition, investment fund management fees can significantly reduce the amount of expendable retirement funds for everyday living needs. Solar facilities represent a stable investment that is not subject to market valuation. By installing solar and taking advantage of the 30 percent Investment Tax Credit, the retiree will have a 25 to 40-year energy source that locks in an reasonable cost for the duration of their retirement. This results in a tax-free earning equivalent for the solar owner. A retiree without solar might withdraw approximately $130 from a 401(k) account in order to pay a $100 electric bill. A retiree without solar could exhaust their retirement funds more quickly than a retiree with solar. By taking advantage of the current investment tax credit, the retiree can save the difference between $130 and $70, which is a significant difference to determining the quality of life experienced by the retiree.
The cost associated with installing solar is contingent on system size and individual needs based on average energy consumption. It is generally recommended to purchase instead of lease because the installation of solar panels for your home allows a person to take advantage of the 30 percent federal tax credit while saving on interest payments.
If a person is unable to pay for a solar system upfront, other options include leasing the solar system or applying for a home equity line of credit. Recently in Arkansas, new legislation was passed that allows those who lease solar panels, rather than purchase, to take advantage of net-metering. This utility billing mechanism credits customers who own a solar energy system for the excess electricity they add to the grid until they absorb it.
A homeowner who opts for solar energy can achieve payback in 7.5 years on average with the savings incurred, and after that, the energy is pretty much free throughout the useful life of the system. The average useful life of a system is 25 to 40 years.
In addition to the savings each year, unlike returns from more traditional investments, financial returns from solar come in the form of monthly savings on an energy bill, not income.
Sizing a system in preparation for retirement
Solar payback is usually in the six to eight-year timeframe. It is recommended to size solar arrays to payback in an expected period until retirement to break even, therefore the energy produced is very affordable for the remainder of the solar useful life.
This often means sizing the system to 40-70 percent of current consumption levels, and after retirement with decreased energy use or commute (electric vehicle), it might cover 100 percent, which is a good thing for fixed income retirement budgets.
Solar energy can reduce costs
When planning for retirement, consider the benefits of solar to hedge energy costs. Already retired? Solar energy can save costs.It’s never too late for you to start taking advantage of the power of the sun.