Should You Rent or Own Your Retirement Home?

by Emily Guy Birken · 8 comments

As retirement approaches for Boomers across the country (including my own parents), these future men and women of leisure face a big question: Where should they live out their golden years?

For some, this question is a no-brainer. Staying in the same house that has long-since been paid off, is in close proximity to children and grandchildren, and holds a lifetime of memories simply makes sense. For others, however, this question is much thornier. What if your house is not paid off? What if it’s too big for the two of you? What if your children have moved to a different part of the country? What then?

There are certainly pros and cons to each course of action, depending on your situation. Here is a breakdown of what might make the most fiscal sense for you:

Why you might want to stay:

  • Home ownership offers both financial and emotional security. Having a home that is paid off will ensure that you always have a roof over your head, and it can also serve as another long-term investment should you feel at all nervous about your other retirement investments. In addition, with the availability of reverse mortgages for seniors over age 62, keeping your paid-off home will provide you with an opportunity to continue to live independently rather than move in with children or siblings, even if your retirement savings are not as healthy as they should be.
  • On a month-by-month basis, staying in your house will cost you less than renting. Though you will still need to pay property taxes and maintenance costs, your monthly outlay for housing will be less than any landlord will charge you for a rental property as long as you own your house outright.

Why you might want to rent:

  • If you still owe anything on your mortgage, you owe it to yourself to free up as much equity from the house as possible by selling it. Your monthly rent will cost you less than your mortgage, and you will additionally have the liquid equity to add to your retirement portfolio.
  • Even if you do own your home, renting might make sense. If you are no longer comfortable doing your own home maintenance, renting takes that headache off your to do list with the added benefit of giving you the proceeds from the sale of your house. Selling your home early in your retirement will also be less stressful and possibly more lucrative than waiting to sell until you have to. If you or your spouse needs to move into an assisted-living facility, for example, you have no guarantee that your house will sell quickly or at a fair price.
  • Also, renting makes a great deal of sense if you are moving to a new community for retirement. Even if you decide you eventually want to buy a new house or a condo in your new home, living in a rental unit for a year or two as you get settled in the new place allows you to take your time about deciding where you want to live. Renting also gives you flexibility to move to new places, something you may be interested in doing if each of your children live in a different part of the country.

Why downsizing might make sense:

A third option in the stay vs. rent conundrum is to downsize from your current home. Even if you feel better with the security of home ownership, you can free up some of your equity and relieve yourself of the burden of maintaining a large home by downsizing to a smaller house or a condominium. This can help you to reduce your tax bill without giving you an additional monthly bill, and it can protect you from the vagaries of leases, which can change from year to year.

Ultimately, the decision to stay, downsize, or move is extremely personal, involving financial and emotional factors. It is important that you remain clear-eyed and flexible throughout the decision-making so you can come to the best option for your family.

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{ read the comments below or add one }

  • I also should mention, being able to live in the comfort of your own home as a senior can provide a great sense of comfort and joy. I would definitely recommend buying instead of renting.

    – Jess

  • Jessica says:

    It’s always better to own! That way it’s an investment for your children and loved ones… something of monetary value that you can leave for them.

    I provide assisted living services in Laconia NH and a lot of my clients own their own retirement homes and have care givers such as me come and assist them on a daily-basis.

    – Jess

  • Nightrider says:

    Here is an idea worth considering: Find an investor who will pay you the equity in your home for a long term hold. Yes, there are investors who will do that.
    As an incentive to purchase, you offer a certain “down payment” amount that will work as your rent over a fixed term of say, 10 or 5 years. This way, you have your equity out for earning income for you while you live in the home for little or no rent for a period.

    Downside? Investor may want to kick you out, legally, after the first year. That down payment you offered as an investment is due and payable of course should that happen. Upside? It is obvious: no rent or little rent. You offer to pay all the utilities and offer to maintain (a fixed amount per month to be agreed between you and the investor).

  • Oakspar says:

    It is important that if you are going to sell for the purposes of downsizing that you do so while you still can maintain the property. Waiting until it is too big of a job means that you have already sacrificed home value to neglect – and surface issues like paint, shingles, and the like carry unproportional levels of value in buyer’s minds.

    It is also important to think of issues of inheiritance. This is less of an issue if you are passing your estate to an individual, but if it is going to be divided among several heirs, then liquidizing such a substantial part of your estate can save them a great deal of frustration and possible loss if the property is sold without care.

  • geneva coupon says:

    If our house was paid off the realty taxes alone are still more monthly than we would pay in rent for a smaller house/townhouse and we can rent where we want, move if we don’t like it rather than being tied to a house that will take time to sell.

  • guest in ca says:

    We’re in the group that’s planning to relocate, probably renting awhile until we’re ready to buy there.

  • If my husband and I don’t completely own our home by the time we retire, I think we’ll move to a retirement community and rent. I’m sure they have lots of things for seniors to do

  • Cassie says:

    If you are elderly and are considering selling your home, you may want to consult with an elder law attorney first. If there is a chance you or your spouse may need nursing home care and you lack long-term care insurance, the rules for qualifying for Medicaid are very specific and complicated. Know your options.

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