I'm 65 With $1.2 Million Saved and a Paid-off $1.3 Million Rental Property.

Age 65 is when Medicare generally kicks in. And for many people, reaching that age either spurs a discussion about planning for retirement or inspires an official workforce exit. For this reason, age 65 is a good time to take stock of your retirement assets and decide if you’re in a good place financially.

If you’re 65 with a $1.2 million nest egg, you’re well ahead of your peers. The Federal Reserve puts average retirement savings among Americans ages 65 to 74 at around $609,000 as of 2022, the last year for which it has data. With $1.2 million to your name (excluding your home and other non-retirement assets), you’re sitting on twice as much savings as the average person in your age range.

Plus, a recent Northwestern Mutual study found that Americans are calling $1.26 million the magic retirement savings number. With $1.2 million, you’re practically there.

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Still, $1.2 million may not exactly give you the spending power you’re after. If you apply the 4% rule to your savings, which would certainly be reasonable if you’re retiring at 65, you get an annual income of $48,000, not accounting for future inflation adjustments.

Now, chances are, you’ll get some Social Security on top of that. The average retired worker's Social Security check is currently about $2,000 a month. If yours is similar, you could be looking at $24,000 a year in Social Security once you claim benefits (signing up at 65 will reduce those monthly payments, since your full retirement age is 67). Combined with $48,000 from your savings, that’s $72,000.

Is that income enough to pull off your dream retirement? Maybe. But if you own a $1.3 million rental property that’s paid off, it changes the story significantly.

The question is, should you keep the rental and allow it to continue generating income for you? Or should you unload it given the risk?

The upside of keeping a rental property in retirement

A rental property worth $1.3 million is probably capable of generating a decent chunk of income. That’s reason enough to keep it.

If your $1.2 million is mostly in stocks, bonds and cash, physical real estate gives you access to a completely different asset class. And a diversified portfolio is essential in retirement. Plus, whatever rental income you collect can supplement your savings and Social Security, potentially boosting your total income substantially.

But that’s not the only reason to keep that rental. Many people look forward to retirement only to find that they’re not busy enough to feel content.

A late 2024 ResumeBuilder survey found that 13% of retirees planned to seek work in 2025. And among those seeking work, 42% said they were interested in a job to combat boredom in retirement.

A British survey conducted in 2019, meanwhile, found that the average retiree gets bored after just one year of not working. That same study found that two-thirds of retirees felt working in some capacity would give them a sense of purpose.

Overseeing a rental property could be a form of work, especially if it’s a home you rent out on a short-term basis, as opposed to on a year-long basis. So you may want to hang onto the property for the sake of keeping busy. And if you previously outsourced maintenance to a property manager because you were too occupied with full-time work to do it yourself, you now have an opportunity to take over and shave those costs down.

Why it could pay to sell your property

While a rental property could be a nice source of retirement income, it could also be a huge expense. A home or even an apartment is something you might need to sink lots of money into, whether in the form of upkeep, insurance, property taxes, or surprise repairs.

The rent your property can command ideally exceeds the costs of ownership. But if that’s not the case, you may want to unload the risk of having an asset that could cost you many thousands of dollars each year to own.

Remember, too, that if you own your home free and clear, even when subtracting real estate agent fees and other expenses associated with selling, you could conceivably walk away with around $1.2 million by putting your rental on the market. That’s money you can invest in assets that are less risky.

You may not get the same income out of that portfolio as your rental itself. But if you’re shedding risk, it could be worth it. And if so, that conceivably takes your savings up to $2.4 million, which could result in $96,000 in annual income under the 4% rule, plus whatever Social Security sends you each month.

What's right for you?

Clearly, there are pros and cons to keeping versus selling a valuable rental property as part of your retirement income plan. Consider your appetite for risk and whether you feel more secure unloading a potentially costly asset in favor of assets that don’t require you to put on a new roof or upgrade the air conditioning system.

If you are keeping rental costs down by doing some of the upkeep yourself, keep in mind that you may not always be able to do so as you age.

Also consider the rental's sentimental value. If it’s been in your family for years or is a home you rent out short-term but use yourself for vacation purposes, that’ll have an impact, too.

Finally, do keep in mind that if you’re not comfortable with the risk of owning a rental property but you like the idea of having that landlord job, there are other ways to keep busy. You could start a club, volunteer, take up a new hobby, or join the gig economy.

While owning a second home could keep you quite occupied, it’s not necessarily work you want to be doing. And some of it might become a challenge as you age. If you sell that property, you’ll have more spending money at your disposal, which could make it a lot easier to fill your days in a meaningful way.

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