Establishing a secure financial future for your retirement requires that you explore a variety of options, but most homeowners don’t realize that installing a solar panel system can be one of the smartest retirement investment options available. By viewing a home solar panel system as an investment opportunity, homeowners can reduce or even eliminate their electricity bills, freeing up more than $1,000 in cash each year. With the increased availability of $0-down solar loans, homeowners that lack the cash required for an upfront purchase can still take advantage of solar as a retirement investment strategy.
To ensure financial stability, retirees and those planning for their retirement generally invest in lower-risk options. Solar panels are a natural fit: they provide steady, increasing returns, similar to the high returns associated with traditional investments like stocks and bonds, but without the unpredictable fluctuations of those markets.
Going solar generates many significant financial benefits:
Solar significantly reduces or eliminates your electricity bills. Your solar energy system can generate up to 100 percent of your electricity needs, eliminating your electricity bill and freeing up more cash every month to spend or invest elsewhere.
With solar, you can hedge against future price increases. Utility electricity rates go up every year – in 2015, they increased by anywhere from 1.3% to 9.6%. By generating your own electricity, rather than buying from your utility, you can protect yourself from unpredictable rate increases for the lifetime of your solar energy system (generally 20 to 30 years).
Solar increases the value of your home. Installing a solar energy system is an investment in your property. Multiple studies have shown that homebuyers are willing to pay more for homes that are equipped with solar panels.
Your solar panel system may even generate income. If you live in a state with a market for solar renewable energy certificates (SRECs), you may be able to earn extra money by selling them. Some utilities also offer production-based incentives that pay you for the electricity your panels generate.
Benefits of solar investments aren’t taxable. Unlike returns from more traditional investment vehicles, your financial returns from solar come in the form of monthly savings, not income (with the exception of SRECs), meaning they are not subject to taxation.
Your solar energy system will save you money, regardless of the financing option you choose. However, some financing options will generate more returns than others. You can finance your system in one of three ways:
1. Buy the system outright. If you have a CD or other investment that has recently matured, buying your solar energy system in cash is the best way to reinvest it. The average homeowner who goes solar achieves payback in just 7.5 years, and keeps 100 percent of the financial benefits of their solar panel system.
2. Buy the system with a solar loan. If you can’t or don’t want to pay for the system in cash, many banks and other financial institutions offer $0-down, low-interest solar loans to help with your purchase. Monthly payments are typically lower than your monthly electricity bill, enabling you to save money right away. Homeowners retain 40 to 70 percent of the financial benefits of their system with a solar loan, depending on the loan terms.
3. Sign a solar lease or power purchase agreement (PPA). If you choose a solar lease, you pay no money up front and are charged a reduced monthly rate by the third-party owner to “rent” a solar energy system. This will likely result in 10 to 20 percent savings on your electricity bill for the duration of your lease agreement. A solar lease or PPA is a great option if your income is low enough that you cannot take advantage of the federal tax credit for solar.
The first step when considering solar as a retirement investment strategy is to find out how much solar can actually contribute to your retirement. EnergySage’s Solar Calculator can give you a quick snapshot of the relative value of different solar financing options in your area, based on your electricity bill and incentives available to you. If you’re ready to start comparing solar quotes, register your property on the EnergySage Solar Marketplace to receive multiple offers from pre-screened solar companies at no cost.
Vikram Aggarwal is the founder and chief executive of EnergySage, the online solar marketplace. EnergySage simplifies the process of researching and shopping for solar. By offering shoppers more choices and unprecedented levels of transparency, EnergySage allows consumers to select the option that provides the best value for them, quickly and easily. Read all of Vikram's posts here.
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