Weighing the decision of whether or not to sell the family home and downsize in retirement is a reality for many people. This involves a series of considerations–including where you’ll live next and how much to spend.
If you do decide to downsize, then the next question is likely whether you should buy or rent. When it comes to choosing between renting or buying the home where you’ll spend your retirement years, it’s important to think through all the options. To help get you started, consider the points discussed below.
The Pros and Cons of Buying Your Retirement Home
One of the biggest reasons people purchase their own homes as opposed to renting is that your monthly payments earn you equity, which can translate to a return on your investment when it’s time to sell. And this is still a good reason to consider buying a home in retirement.
Another great pro for purchasing your next home is the fact that you may have more options to update your property. If you don’t like the color of your walls, floors or countertops in a rental property, it’s unlikely you’ll be able to do much to change them. You may be permitted to add a coat of paint to your living room, but only with permission and likely only if you repaint the walls again when you move out. In your own home, you have the options to update and customize your property to fit your wants and needs.
When it comes to negatives, buying the home where you’ll retire comes with some financial considerations–you will need to take care of and pay for home repairs, for example. For some retirees, that’s time and money that could be better spent enjoying themselves doing the things they love. Purchasing a house, condo or townhouse also means you have a permanent homestead. The privacy and security that provides could be a positive for some, but that permanency can also be a negative that could limit travel and adventure.
The Pros and Cons of Renting in Retirement
Many of the negatives associated with purchasing a home are the positive aspects of renting. For instance, if you don’t want to deal with leaky faucets, mowing the lawn or dealing with a water heater on the fritz, renting might be a great option for you. If you would rather spend time on the beach, with your family or working/volunteering instead of tinkering around the house, then you may find that renting a home in retirement is a great option.
Another positive is that if you would like the flexibility to travel and move around in retirement, renting may actually be cheaper in the long run. While you will be required to pay rent, you’ll save money on home repairs, frequent moving costs, realtor fees and maintenance costs. When compared to selling a home, the costs to move from one rental property to another is minimal, so for people who value adventure and want to move to new locations throughout retirement, renting could be a great option.
Although, despite the flexibility, many people have a hard time with the idea of large rent payments without earning any equity in that property in return. Another negative to consider is that if you are renting a townhouse or condominium, you’ll likely share walls with your neighbors, which could mean more noise and less privacy.
Is Buying or Renting Right for You?
It’s not that either option is better than the other; it’s all about what will fit your retirement lifestyle best. Your advisor can walk you through your options, including how each path will fit into your overall financial plan. Then, you can take some time to think about which of these choices will give you the retirement you want and deserve as you take this next step in life.
