Should Retirees Rent or Own? What is Your Best Housing Choice?
Whether to rent or own in retirement is a big decision that should not be taken lightly. Either option could help or hurt your financial security depending on where you live and your specific retirement needs.
When you think of someone considering whether it is better to rent or own, your first thought might be of a younger first-time homebuyer. With today’s sky-high real estate prices, many think it is worth it to make the sacrifices necessary to own a home in places like L.A., Seattle or San Francisco.
The reality is that many older homeowners are grappling with this issue, as well, but for a variety of different reasons. Some have mortgage payments they couldn’t afford if they stopped working while others simply wish to forgo the hassles of home maintenance. Others desperately need access to their home’s equity in order to afford basic necessities needed in retirement. A few may be looking to downsize, or right size, their home for a more joyous retirement while others might be planning to move. The bottom line is that homeownership is costlier and more work than many people realize.
If you are nearing retirement and have been renting most of your life, running out and buying a new home will likely not make financial sense. On the other hand, if you have owned your home, you may be shocked by what it costs to rent a lower-valued home in your current neighborhood. This is a major decision that should not be made on a whim. Here are a couple of areas to consider when making the decision of whether to rent or own a home in retirement.
Tapping into Home Equity
If a 30-year-old asked me if her home was an investment, I’d suggest that she think of it as a place to live. However, if a 55-year-old asked me about using his home equity as part of his retirement plan, the conversation would be quite different. We would discuss what tapping his accumulated home equity could potentially mean for his retirement. Along with the ways he could potentially turn his home’s equity into additional retirement income.