Retirement investment strategies: Installing solar

solar as a retirement investment strategy

Establishing a secure financial future for your retirement requires that you explore a variety of options. Still, most homeowners don't realize that installing a solar panel system can be one of the smartest retirement investment options. 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 money required for an upfront purchase can still take advantage of solar as a retirement investment strategy.

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Key takeaways

  • Going solar is a smart retirement investment strategy.

  • With solar, you will save on electricity bills, will be protected from inflation, and may even generate income.

  • There are three main ways to finance your solar system: purchase it outright, use a solar loan, or sign a solar lease or PPA.

  • Explore your solar options on the EnergySage Marketplace.

To ensure financial stability, retirees and those planning 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:

1. Significantly reduces or eliminates your electricity bills

Your solar energy system can generate up to 100 percent of your electricity needs, eliminating costs on your electricity bill and freeing up more cash every month to spend or invest elsewhere. It's important to note that even if you don't owe money on your electricity bill, you'll still receive an electricity bill if you're connected to the grid.

2. Protects against future price increases

Utility electricity rates go up yearly – over the past ten years, they've increased by about 20 percent! 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 25 to 30 years).

3. 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 equipped with solar panels.

4. May 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.

5. 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 your financing option. 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 with EnergySage in 2023 achieves payback in just about 8 to 9 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 PPA

If you choose a solar lease, you pay no money upfront 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 power purchase agreement (PPA) is an excellent option if your income is low enough that you cannot take advantage of the federal tax credit for solar.

Is solar a good long-term investment?

Solar is an excellent long-term investment – compared to other investments like the S&P 500 and a 5-year CD, solar has a better return on investment (ROI) and much lower–essentially zero–risk. In 2023, the average payback period for a solar system on EnergySage is about 8 to 9 years.

Are solar panels worth it for seniors?

Solar panels are worth it for seniors. You see the most significant savings overall if you purchase your system outright. However, with a $0-down, low-interest solar loan, your monthly payments will typically be lower than your electricity bill, allowing you to see savings on day one.

How long do solar panels last?

Solar panels generally last at least 25 to 30 years – sometimes even longer. Many solar panel warranties cover your solar panels' power output and performance for at least 25 years.

The first step when considering solar as a retirement investment strategy is to determine how much solar can 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 available incentives. If you're ready to start comparing solar quotes, register your property on the EnergySage Marketplace to receive multiple offers from pre-screened solar companies at no cost.

A version of this post originally appeared on Mother Earth News.

Find out what solar panels cost in your area in 2024
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  • 100% free to use, 100% online
  • Access the lowest prices from installers near you
  • Unbiased Energy Advisors ready to help
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