Big Real Estate Moves That Can Boost Your Retirement Income

Whether retirement is looming in the near future or so far off it feels like it'll never arrive, planning for it is something everyone should be doing. It's important to make sure you have enough set aside to live the lifestyle you want. One of the best ways to do that is with a diverse portfolio (which is, by the way, one of the secrets wealthy people rely on to grow their wealth). A valuable component to many portfolios is real estate.

Purchasing real estate not only gives you something you can leave to your loved ones, but it also gives you an investment you can call on when you need to raise some cash, whether it be to support your retirement, help out a family member, or pay for unexpected expenses, such as medical bills or long-term care. What's more, real estate investing can also take on a completely different approach and be used to generate regular income so that your earning years extend beyond retirement age.

When it comes to setting yourself up with regular income in retirement, two real estate moves to consider are rental property and a real estate investment trust, or REIT (pronounced REET). Though both are real estate investments, they each offer two completely different approaches to generating income.

A REIT allows you to invest in real estate without having to buy property up front. Instead, it's a company that operates like an investment broker. Funds provided by investors are put into various real estate assets and, in return, those investors receive regular dividends on their investment(s). This format makes the REIT option great for anyone looking for a passive income stream for retirement, one that allows them to pursue other interests rather than taking an active role in earning money.

Rental property, on the other hand, requires a larger initial investment and a much higher rate of involvement. By purchasing a rental property, you're not just acting as an investor, but as a landlord as well. Becoming a landlord in retirement isn't ideal for everyone, but because the return on such an investment can prove worth it (i.e., profitable), many opt to hire a property management company to take over the day-to-day responsibilities. Although doing so will detract from your overall profit, it allows you to sit back and enjoy the income generated by your property, without the hard work of maintenance and upkeep, rent collection, finding tenants, etc. (Here's how much Americans think they need to retire comfortably.)

There are plenty of ways in addition to real estate that produce passive income, and many options don't require the typically large up-front investment of buying property (like investing in dividend- producing stock). This said, a real estate investment not only has the potential to produce a regular income for you, but also deliver a significantly large payout if you wind up selling at the right time. For this reason, real estate can present an attractive investment opportunity for many, particularly as they head toward retirement. Still, it's important to be aware of your own investment capacity and never invest beyond your means.

To determine the best approach for you — and when to make a big move like purchasing property — regularly reassess your investment plan and goals to make sure they're still working for your specific needs and lifestyle, as well as your short- and long-term financial goals (i.e., retirement). As you do, keep in mind that real estate, whether a rental property or a REIT, offers a fluidity that allows you to adjust your plan should your needs or interests change: You can always sell rental property, or pull out of a REIT. (Here's how much Americans think they need to retire comfortably.)