Housing choices can have a large impact on your financial situation throughout your life. Retirement doesn’t change that, but a person in their 70‘s and 80’s may view housing with a different set of desires and selection criteria than they had previously in their 30’s, 40’s, and 50’s. When thinking through a housing situation in retirement, this first big decision is whether to own or rent a home as you continue to age. The following, while not exhaustive, lays out some pros and cons of both situations. This is not a recommendation in one direction or another, and many different aspects of your own life situation should be taken into consideration when selecting your housing situation.
Owning Your Own Home
Pros:
If you have paid off your home, then your housing expenses are limited to items such as maintenance, property taxes, and repairs.
If you have a fixed rate mortgage, your monthly expense is known and should not fluctuate.
For many, staying in the house they’ve always had provides a sense of comfort and safety.
There are services available for hire that can take care of pretty much any maintenance, repair, or service you need.
You are able to leave a large asset as part of an inheritance that will receive a step up in basis at the passing of both you and your spouse.*
Cons:
The maintenance and upkeep are completely your responsibility.
The house you bought 30 years prior may not have the layout you would desire today. Example: It may have stairs you are not able to get up and down easily.
You may be located far away from your family or other friends, making you feel isolated and without help.
Renting A Home
Pros:
Rental units are available that will be responsible for all of your maintenance and upkeep.
Depending on your contract, you may never be responsible for large, unexpected expenses that are required for roof repair, plumbing, or other projects needed.
You have flexibility to move closer to family and friends when you desire, without the hassle of trying to sell or care for your home while far away.
The sale of your home allows you to access money previously tied up in your home for other living expenses or investment opportunities.
Cons:
Many landlords raise the price of rent based on inflation and demand over time, meaning it can be hard to budget the cost for the remainder of your life.
Due to the unknown length of your life, the total cost of renting is unknown.
Your monthly housing expenses will not be contributing to an asset that can be left as an inheritance.
The landlord may decide to stop renting at some point, causing you to have to move whether you want to or not.
*This may vary based on state specific laws and the laws may change.
This is not a recommendation to purchase, sell, or rent a home in retirement. The pros and cons listed, which are not complete nor exhaustive, are meant to serve as a thought-provoking exercise allowing you to think through how you would prefer your housing situation in retirement. For specific questions, please contact your financial advisor.