Is it Better to Rent or Buy in Retirement? Pros & Cons

Retirement brings lots of changes. No more 9 to 5, more free time to do what you love and lots of decisions to make to adjust to your new lifestyle.

At the top of your list: housing. Renting and owning each comes with a laundry list of pros and cons — and choosing becomes more complicated if your mortgage is paid (or almost paid) off. Factor in a fixed income and the decision becomes even tougher. We weigh the pros and cons of each option to help you find out whether you should rent or buy in retirement.  

Buying a Home in Retirement

There’s no denying the peace of mind that comes with owning your home. But buying a retirement home comes with several considerations.

The Pros of Buying a Retirement Home

• Equity represents a cushion. Having equity in your home gives you the freedom to take out a line of credit if you need it. Your home can also be passed down to relatives.
• Taxes and repair or maintenance costs may go up, but your mortgage payment will hold steady. If your home is already paid off, you won’t have a mortgage payment at all.
• When you own your home, it’s yours to do with as you please. You can paint, renovate and change in ways you can’t with a rental.

The Cons of Buying a Retirement Home

• Your home’s value may go down. Your property is only as valuable as the housing market is healthy. If your home’s value is steadily going up, great. If you’re worried you may lose value over time, talk to a real estate professional about your options.
• The cost is more than just your mortgage. Once your home is paid off, you’re still responsible for property taxes and homeowners insurance. These costs can be significant, especially if you’re on a fixed income.
• Expect new costs. As you get older, you may need to outsource work you once handled yourself. Maintaining your pool and lawn may not be feasible later in life. The same goes for your house. As it ages, expect bigger, more costly problems.
• Homeownership comes with a level of permanence, for better or worse. Moving comes with the stress of finding a buyer, dealing with a realtor and crossing your fingers the market is in your favor. Knowing when to purchase can help alleviate some of the doubts you may have.
• Annual upkeep is pricey. Some maintenance needs are relatively low cost, but if you need a new HVAC system or a new roof, be prepared to spend thousands. 

Does It Make Sense to Rent in Retirement?

Owning may not be in the cards financially, or you might be ready for a change or want to downsize. In that case, renting in retirement may be your best option, especially if you don’t mind having a landlord managing your space.

The Pros of Renting in Retirement

• A home that fits your lifestyle. The perks of owning your own home may no longer fit your lifestyle. There may be little need for a big yard and extra bedrooms. Look for a new spot with amenities you don’t want to give up and those you’d like to add, like someone else to fix that squeaky door, an onsite gym and a sparkling community pool.
• Enjoy fixed costs. Your housing costs are largely set. Renting eliminates variables like costly repairs or maintenance.
• Save on living expenses. Though your rent payment may be higher than a monthly mortgage, the total cost will likely be lower factoring in all the other expenses that come with homeownership. Some rentals will even include the cost of utilities and city services, which could run you a few extra hundred dollars a month if you own your home.
• With a rental, you’re only bound to a lease. This can be freeing, especially if you’ve lived in the same home for decades. If your financial situation changes or you get tired of your neighborhood, you can relocate in retirement much more easily.
• Less responsibility to keep up your property means more free time, plain and simple. Use that hour you’d spend mowing the lawn to lounge by the pool or visit your grandkids.

The Cons of Renting in Retirement

• Maintenance is at your landlord’s discretion. Your landlord or management company is charged with maintaining your rental, giving you much less control over when and how repairs are made. If you’re accustomed to the responsibility that comes with owning your own home, this will be an adjustment. 
• Your rent isn’t guaranteed. Unlike a mortgage, the amount you pay each year may go up. Expect annual raises to your rent. Sure, you can move, but that may cost more after paying for moving expenses and deposits. 
• Your payments don’t earn you equity. This can be a mindset shift for those used to paying a mortgage. Your rent is now an expense for a place to live, not a long-term investment that’ll go towards building equity. It does, however, free up funds to use in other ways.

The Best Retirement Plan for You

Deciding if it is better to rent or buy in retirement is just one part of the financial planning puzzle. For help figuring out which retirement plan is best for you and your future, talk to your Farm Bureau agent today.