Buy or Rent – Retirement Dilemma

Buying or Renting Your Home In Retirement

The kids are gone, the house is paid for. You are ready for retirement. The question is whether keeping the house is the best idea. It’s a real retirement dilemma.

According to USA Today, as many as 46 percent of seniors aged 65 or older are deciding to rent a home rather than buy a new house or keep their previous one. There are pros and cons to each option.

Buy

For someone who already owns their own home with no mortgage payments, keeping the house might seem an obvious choice. According to the Motley Fool, this house can be used as a source of income in retirement through a line of credit or a reverse mortgage. This could be important if there is a sudden need for extra money.

On the other hand, annual upkeep eats up as much as 1 to 4 percent of the value of the house each year. These expenses can add up quickly on an older home. Then there are property taxes and homeowner’s insurance. It is also entirely possible that a housing market crash could erode the value of the home right when it is needed the most.

Rent

On the flip side, selling a home near or during retirement when the market is right could add a lot of cash flow and savings to draw from in the event of an emergency. The idea being, cash can be invested and might be worth more over time than the house’s appreciation.

Kiplinger’s took a look at several scenarios involving home ownership, selling, and renting. They wanted to decide which option made the most financial sense. The study determined that in the short run renting was the better choice. It also found that buying a new home was more profitable after ten years or more. Finally, they noted that it could be possible to pay yearly rent with interest gained from investing profits from the sale of a home.

Remember too, when considering this retirement dilemma, that this time of life is also about freedom. Separate from the financial aspects, renting a home could allow retirees to move around to different parts of the country. Renting can make travel easier than worrying about having to sell or maintain a house from a distance.