Every retiree’s needs are different, which means that every person who retires will have to make their own decisions about whether they want to own a house or rent one.
Some seniors have already paid off their homes and wish to keep living there; others are prepared to invest in a property where they can enjoy their golden years; still others would prefer to live in a place where they don’t have to control the long-term maintenance of the property.
When it comes to retirement living, what makes more sense: renting or homeownership? There are pros and cons to both sides of this story. Let’s take a closer look.
Homeownership: Home Equity Has Value
When thinking about homeownership, it’s essential to consider the various ways that home equity has value for you.
Home equity could turn into extra income as you enter retirement, or it could simply act as enough of an investment to float you through your future years. Using home equity as part of your retirement beyond just living in the house, however, requires that you are comfortable making changes to your income strategy.
Selling your home, renting out your home, or taking a reverse mortgage are all ways that some seniors choose to use their home equity to their advantage in retirement. Just as there are both pros and cons to homeownership in retirement, there are also pros and cons to making these changes to your home.
Homeownership: When Keeping a House Makes Sense
Many retirees would be comfortable staying in their house in retirement, but they aren’t sure if that would make sense for them.
If you have a low mortgage, or your mortgage is completely paid off, and you have taxes you can handle, staying in your house is an option.
This may not be possible for those who bought their house more recently. Consider how much the house will continue to cost each month when you have less income in future years; this could help you determine if staying in your house will work for you. Selling may be the best option if you don’t have enough saved for retirement.
It is also vital that you consider how it will be to live in your house in your older years. If you live in a storied house, things like stairs or inaccessible bathrooms could prove to be a big issue to deal with. It’s okay to want to keep your home, but you will also need to be realistic about changes that may be required as you age.
Renting: A Reduction in Responsibility
One of the reasons that many seniors choose to rent is that they can reduce their number of house-related responsibilities as they age. Keeping up with all the needs of a house can be difficult for people of any age, and it can get even more tiring when you are older.
From mowing the lawn to shoveling snow, certain upkeep tasks are nice to hand off to someone else by renting. Additionally, you are no longer responsible for property taxes or similar large financial responsibilities beyond rent and utilities. This can make sense for many people’s retirement plans.
Renting: Flexibility and Accessibility
Another benefit of renting for seniors is that you have more flexibility in choosing where you live and how you live.
The rental property managers at Buttonwood explain that apartment units, condo units, and one-story rentals are often great choices for those who want to have a more accessible living environment. They go on to say, “When renting, it is also possible to change where you are living without significant cost. Unlike buying and selling houses, you can simply end a lease, start a new one, and move to your new location. This gives flexibility that a lot of seniors like to have in retirement.”
Moving as you please in order to be closer to family or friends is a big benefit of renting over buying for many people in retirement.
Homeownership vs. Renting: The Advantages
Choosing between homeownership and renting is going to be a difficult decision no matter what. However, you can start to narrow down your choice by thinking about what you need most in a home. What types of advantages are going to be most beneficial for your lifestyle? Consider those needs and then compare them to this list of advantages for each living situation:
- Staying Situated
Many people like to continue to live in a home that they feel has long-term stability and doesn’t rely on another person (i.e., a landlord) to be involved. This provides both physical and emotional stability for many.
- Tax and Financial Benefits
There are several tax perks for owning a home that do not apply to renters. Additionally, homeowners who have paid off their homes may find it significantly more affordable to live in said home. Plus, equity is something that you can keep growing or pass down your line.
- A Home of Your Own
A lot of retirees have worked their entire lives to be able to call their home theirs, and they want to keep living there. This allows you to personalize as you please without needing to follow any landlord rules for alterations.
- Flexible Living Situation
You can move as your needs or desires change, and you can do so without dealing with the stress of selling and buying homes.
- Accessible Options
Find homes that will allow you to avoid home maintenance or live without climbing stairs; these things become important in later life.
- Balance Expenses
Renting is often less expensive from month to month since property taxes, mortgage payments, house maintenance costs, and HOA fees may be eliminated.
- Free Up Finances
Selling a house and moving to rent instead gives you more money that you can use to invest or enjoy your golden years.
Whether you are delaying retirement to increase your savings before you stop working or you’re ready to move into this stage of your life, consider the pros and cons of homeownership versus renting before you take the next steps. You’ll be better situated if you ensure that you know what you are getting into in advance.
Written Exclusively for Merriman.com by Madison Smith
Madison Smith is a personal and home finance expert at BestCompany.com. She works to help others make positive financial stride in their lives by providing expert insight on anything from credit card debt to home-buying tips.
Disclosure: All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.