Why Making Solar Power Part of Your Retirement Plan Might Make Smart Financial Sense
See 4 Ways Solar Energy Extends Financial Health Even on Fixed Incomes
Installing solar panels to enjoy during retirement could be one of the best financial decisions you make.
If you’re approaching retirement or already living it, your financial plans have probably shifted quite far from where they were 20 years ago. You now have different priorities and concerns. Your biggest uncertainties now center around making your income and savings last the rest of your life.
Many retired people live on fixed incomes, often in homes they’ve owned for many years. Others have downsized to a smaller home. And you probably have some investments in various retirement accounts or 401ks working for you.
So let’s see how solar power provides a positive lift to four major areas of finance that concern retired people:
- Home value
- Stock market investments
Solar Power and Inflation – Extending Your Finances in Retirement
One estimate found that a typical retired couple can expect to spend $58,000 on power bills over the next 25 years. That’s assuming a 3.5% power bill inflation rate, about average across the U.S.
If you spent $20,000 on a solar energy system that saved you $58,000 on electric bills, does that seem like a good deal?
$38,000 ROI? Sounds good to us!
Coastal Solar’s panels come with a 25-year warranty, so that 25-year figure isn’t chosen at random. Your panels will save you money for 25 years, at minimum, and those savings will increase over time because the costs of power from the utility will continue to rise.
Put another way, you’re offsetting kilowatts, not dollars.
If your solar panels produce 1000kWh per month and you use 1200kWh per month on average, then you’ll be paying only for 200kWh per month. If prices rise 3.5% per year, that 1000kWh produced by your panels saves you more and more money each year.
As another approach, if you choose to finance your solar energy system rather than pay for it all up front, you now have a fixed monthly payment rather than an ever-increasing power bill due to inflation. And with financing, even though you’ll pay it back over years, you get the entire federal tax credit all up front.
See 5 reasons your electric bills will never stop increasing
Solar Power and Home Values – Increasing Net Worth in Retirement
Recent studies have come out that show homes equipped with solar panels sell for higher amounts than those without. These results were seen across the country, not just in California.
From an investment standpoint then, solar energy pays you back not just on your power bills, but when you sell your home. If you intend to pass your home on to your heirs one day, you are giving them a higher valued home if you equip it with solar panels.
Here’s a happily retired couple giving several reasons why they put solar panels on their home
Solar panels in retirement go right along with the ‘own vs rent’ mentality.
You chose to own a home rather than rent, because it builds in value over time. With solar panels, you own your power, rather than rent it from a utility that charges you more and more each year.
If you own your home and own your power, your home values go up.
Solar Power and Investment – Beating the Stock Market in Retirement
A remarkable 2014 study found that investing in solar energy would actually reap a higher return than the stock market in 46 out of the 50 largest U.S. cities.
The math and finance language can get a little complex, but here’s the main takeaway: The higher rates of return were due to inflation, market volatility, tax credits and incentives, how much solar offsets your energy bills, and several other factors.
In retirement, one of the bigger concerns is making your investment assets last as long as possible, in part because you’re often on a fixed income. That’s why most financial advisors recommend reducing risk as you get older. The stock market is risky.
But solar energy never loses money, because your array keeps producing energy, even when the market crashes.
Solar Power and Taxes – Reducing Tax Burden in Retirement
Some states pay you back for extra solar energy your panels generate. It’s called net metering. Other states offer additional ways of compensating you.
None of this income is taxable.
In addition, many states offer tax rebates and credits simply for installing solar panels, and the federal government provides a generous tax credit for solar installation (though it is set to expire at the end of 2021, so don’t delay).
It’s important to emphasize that these are tax credits, not deductions. A credit knocks down your actual tax bill. A deduction just lowers your taxable income. So if you owed $5000 in taxes, but had a $5000 tax credit, you’d pay nothing. If you owed $5000 in taxes, but got a $5000 tax deduction, that would merely lower your taxable income by $5000.
Still nice, but far less in real dollar savings than the credit.
Is Solar Energy Right for You In Retirement?
You have seen four ways that solar energy benefits your short and long term financial health.
It protects you from electric bill inflation, saves on taxes, increases home value, and outperforms the stock market.
Here’s another way to look at it – 5 reasons solar is right for your home
But remember – the federal tax credit starts expiring at the end of 2019, so don’t wait.
Now is the time to ask questions and find out if installing solar power during retirement makes good financial sense. Getting a solar quote is free, and you can ask all the questions you need answered.
Coastal Solar doesn’t use high pressure sales tactics. We genuinely want to help people understand what they’re getting and be able to determine if it’s a good deal. There are some situations where we have told people solar might not be a good choice for them, such as having just too much shade on their property.