For many, the idea of retirement is the absolute dream. You get to spend more time with family, travel the world, and learn those hobbies that you never had time for in the past. While most of us think about the fun we can have in retirement, not everyone considers where they will be living during their golden years. As someone who is not tied down, you have more options than someone with a full-time job, so you need to decide whether you want to rent or own your home.
There are many pros and cons to either decision, so smart planning is a must. You’ll want to think about life changes, potential expenses, the actual location of your home, and more. Below we will review some common considerations so you can make the most informed decision.
Pre-Decision Considerations
Before deciding how you want to live in retirement, you need to look at your life now and how it might change in the future. As a first step, look at your entire financial picture, including how much you have saved now, how much you will be bringing in during retirement, and any expenses that you are assuming you’ll have every month. If you are thinking about purchasing a house, start saving for a down payment.
You’ll also have to think about whether you need to move from your existing home in the first place. While it is not fun to think about, you may become less mobile as time goes on. If you currently have a home without stairs, it might be a wise idea to stay put. What about access to medical care? If the hospital is right down the street, you may not want to create more distance. All of this doesn’t even take into account the proximity to your family. You’ll probably want to be near them as they will give you love and support as well as help with any medical emergencies.
If you are set on moving, you have to get your finances ready for buying a new house or renting a new place. Ensure your credit score is strong and that down payment you’ve been saving is large enough to make a good dent in either the selling price or the rental agreement. It is a good idea to set up a budget so you can see how much you will have for the monthly expenses, whether that is rent or a mortgage payment. If you are short on money, you have the option of retiring while still doing a side gig like driving for a delivery company to make the extra funds you need. If you are planning on keeping your current house and renting out a different place, you can make money by turning your owned property into an Airbnb.
Pros and Cons of Home Ownership
Those who are considering owning a house in retirement will definitely want to have their budget in mind as there is always the chance of unexpected costs. You never know when there will be fluctuations in market value, additional insurance costs, or unexpected maintenance that you will need to perform on appliances or other property throughout your home. Of course, you also won’t have to worry about unexpected rent increases.
When many people think about buying their dream retirement house, they often consider living in an exotic location like on the coast or on a beach. This can be a great idea as you will always wake up to gorgeous views, live in a therapeutic atmosphere, and this house could be a good investment that you can sell later on in your retirement. However, there are negatives to consider as well, including a much larger asking price than an inland home.
Living on the water will also require additional costs and provisions, given the greater chance of natural disasters and flooding. You’ll likely have to pay more in homeowners insurance, plus flood insurance. Not only that, but you will want to reinforce the house with storm shutters and hurricane windows, which have an additional layer of laminated glass that goes over your windows to prevent breakage. If you rent, the costs of these precautions may be covered, but if not, you will have to add them to your budget. Does your retirement income provide what you need?
Pros and Cons of Renting
For retirees who want less baggage during their later years, renting a property or apartment may be the way to go. The chances are good that the monthly rent will be less than the cost of a mortgage payment and you won’t have to worry about paying for extras like storm windows or replacement costs if an appliance listed in your lease happens to break. On the down side, a rent increase can happen at any time, often with little notice, and if you don’t have the funds, you could be in trouble.
Speaking of maintenance, when you rent, you likely won’t have to worry about doing manual tasks that you used to do at a house like cutting the grass, cleaning large outdoor windows, and power washing the deck. Tasks like these that used to be easier can be much more daunting as you age and you don’t want to get hurt. If you know you are prone to accidents, you can also move into a retirement community, which will save money and you’ll have safety features already built in.
A rental is also a good idea if you don’t want to settle on living in one place. Many homes offer rent-by-the-month arrangements and if you decide that you want to live in Hawaii for the summer, you can do so without breaching any contracts. If you live in a house, taking vacations includes an involved process of securing the home, setting alarms, and putting lights on timers. When you rent, the apartment is often secured for you.
In the end, the choice to rent or buy is ultimately up to you. There are certainly pros and cons to both, so sit down and talk it over with your family before you make a final decision. Either way, be sure to enjoy your golden years to the fullest.
