When Jane, 64, thought about downsizing in advance of retirement, she imagined selling her four-bedroom house and purchasing a smaller home or condo. The idea of renting never occurred to her.
“I thought cashing out the equity [in my current home] and using it to buy a new home was the most appealing option,” she explains. However, touring a new apartment building made her rethink her plans. She loved its location and modern design.
Retirees and pre-retirees considering downsizing often struggle with the decision of whether to rent or buy. “At this point in their lives, people are very accustomed to the idea of home ownership and it’s hard to give that up. But, there are some real advantages to renting — and pre-retirees often don’t take time to think through those advantages.
Weighing the Options
The decision of whether to rent or buy in retirement requires careful consideration. You have to do your due diligence,” he says.
Although the median home price rose 4.7 percent between August 2014 and August 2015, there’s no guarantee a home’s value will increase.
There are obvious advantages to owning a home in retirement.
But there are downsides to homeownership too: the cost of maintenance and repairs; tapping equity requires a lender’s approval and selling takes time and effort (plus it comes with a lot of paperwork).
Renting has upsides, also. For starters, it’s flexible: Want to test out a smaller home or one-level living? Plan to move from an urban center to a quiet coastal town? Renting is a good option. If the move turns out to be a bad idea, you can just move on.
Renting can also be cheaper than buying, both initially and continually. Instead of coming up with a sizable down payment, you’d only be required to pay the first month’s rent and a security deposit. You don’t have to budget for maintenance and repair costs, or condo association fees or property taxes.
In addition, an apartment building could offer aging-in-place amenities such as elevators, wheelchair access and a pool and fitness center.
Renting can also let you deploy your money to help boost your finances in retirement. You could use the cash from the sale of your home to build your nest egg by investing in mutual funds, annuities, stocks or bonds.
Run the Numbers
The decision of whether you should rent or buy in retirement often comes down to the particular dollars and cents of your situation.
Excerpts - nextavenue.org