Selling my house I am living in will generate a big part of my retirement. Sadly, that does not work out except if you plan to take a serious step back in terms of your house style and size. The reason it does not usually work out is because you need to buy yourself a retirement house, typically with increased security and possibilities for health support.
Therefore, even though a typical retirement house or apartment is smaller than the house you were used it, it is relatively much more expensive to cater for the extra needs of the elderly. They are usually also in short supply, driving up the prices. For some retirement villages or apartments there is even waiting lists years in advance! Basically you will be swapping you house for a more suitable living place at roughly the same price. The exception is if you have more than one property, the second property will indeed provide a handy extra to your income.
I will save up most of my retirement once my kids are out of the house. Indeed your expenses will be a lot less and by that time your salary will have increased significantly. Typically parents are about 45 to 55 years old once their children have become more or less self-sustaining. That leaves you with about 20 to 25 years to save for retirement. At that stage you will need to put away at least 30% of your salary!
That is a huge chunk by anyone’s standard! And while you were not used to saving something significant up to that point, switching to a 30% cut on your income will be very challenging to get used to. Besides that, you miss out on the 9th world wonder: compound interest.
If you started at age 25 to save for retirement, you would only have to save about 7% of your salary through all your years, compound interest make up for the rest! Almost 40% of your retirement fund is ‘contributed’ for free by compound interest. Starting you retirement fund savings at age 45 means compound interest will only be around 10% of your final retirement amount saved. A 30% difference on, for example, a $2 000 000 retirement amount is $60 000! Free from compound interest.