Jun 9, 2022

The Pros and Cons of Renting or Buying a Home in Retirement

Manny Cominsky

One of the most common questions that we hear from people as they get ready for retirement is whether it’s better to own or rent a home in retirement. Come retirement many homeowners find that their homes are no longer suited for their new retirement lives: many are now empty nesters who no longer need a large home for raising a family and are looking to downsize their homes, and many retirees live in cold-weather, high-tax areas that are not optimal retirement locations. For many people, the decision to downsize homes and move to a warm weather retirement destination is obvious. But what is less obvious is whether to buy or rent a new home when they get to their retirement destination. 

As with most things in real estate, there isn’t a right or wrong answer to this question, and the right answer will largely depend on those factors that have probably been influencing your decision whether you rent or buy throughout your life like the housing supply in a given area, your budget, or how much time you plan to spend at home. But while the decision between buying and renting in retirement may feel the same at a high level as the other times you’ve made that choice, you should consider how your retirement (and with it your subsequent change in lifestyle or income) may affect your future housing plans. Given that housing costs are likely to be one of your primary monthly costs in retirement, it’s important to carefully consider each option.

As with all major financial decisions, it often makes sense to talk to a financial professional when deciding whether buying or renting a home makes the most sense for your own retirement plans.

Pros of Owning a Home in Retirement

One of the nicest things about owning a home, particularly in your retirement, is the peace and mind that comes from knowing that you are your own landlord. This not only means that you will be able to stay in your home as long as you like, but it also means that you will be able to remodel or renovate your home entirely as you choose. If being in a home you own is something that is important for you, and for many people we speak to it is, then the peace of mind that comes with home ownership is certainly a considerable benefit (and one you should seriously consider for yourself). Not only is there this emotional benefit to home ownership, but another thing that makes owning a home great in retirement is that it gives you greater flexibility in doing renovations on your home (something you’re limited from doing in a rental unit). For people looking to optimize their home for aging in place by doing certain construction projects like adding showers with wider entrances or adding handrails in hallways, home ownership can sometimes be the more efficient, not to mention more personalized, option. 

In addition to these non-financial benefits of home ownership, there can be certain financial benefits as well, such as the fact that your home can appreciate in value or that it can be passed down to the next generation. Relatedly, there are also tax benefits as you can deduct mortgage interest and property taxes from your taxes. 

Cons of Owning a Home in Retirement

While there are certainly some financial benefits to home ownership, like some tax deductions or the possibility of your home’s value appreciating over time, home ownership can also come with some heavy costs that can be difficult to manage for people who have retired and are now living on a fixed income. Not only is a house itself expensive, but it also comes with significant monthly costs from insurance, to taxes, to utilities which can be expensive as well as a paperwork headache. In addition, house maintenance can not only be costly but it can also sometimes strike quickly and out of nowhere such as when a large appliance breaks. These potentially large and unexpected expenditures can sometimes be difficult to cover for those living on fixed incomes, particularly when most of their liquidity is tied up in the value of their home. 

Pros of Renting a Home in Retirement

If the stability of home ownership isn’t as important to you, then renting may be a great option in retirement. As already noted, if you’re currently a homeowner then selling your home can provide for a huge windfall to help fund your retirement. Having a lot of cash on hand can be a huge benefit in retirement when you are living on a fixed income, but still need to pay for unexpected expenses. In addition, renting lets you keep your options open for where you spend your retirement. While the popular notion may be that people move to a single place for retirement, we often speak to people who have explored several areas in their retirement and loved the freedom they were afforded by being renters. And finally there is the biggest benefit of all being a renter: being able to say goodbye to all the chores and expenses that come with home ownership. Not only is renting generally a cheaper option than buying a home in most areas of the United States, but renting also means that you can say goodbye to the hassle and cost associated with the upkeep and maintenance of a home. Not only is maintaining a home both expensive and a hassle, it can also become increasingly difficult to do as you age. 

Many people use the proceeds from the sale of their home to fund their retirement, including paying for their rent.

Cons of Renting a Home in Retirement

While many people love renting for the flexibility it offers, there can also be downsides to having to routinely renegotiate or look for a new lease. For one thing, particularly if you live in a popular area, it is possible that your rent might significantly increase from year to year in a way that might make your home (or general area) unaffordable, a particular issue for those living on a fixed income. For some people this uncertainty makes renting in retirement a less than desirable option. And while selling your home is an incredibly popular way to fund your retirement, some people don’t want to sell their home and therefore give up an asset that can not only appreciate in value, but can also be passed on to an individual’s family. Finally, you generally cannot renovate or customize a home that you are renting (outside of minor alterations). So while many people may opt to make their home they own more equipped for them to age at home (a trend known as aging in place), you might not have the ability to optimize your home for your age if you opt for rental properties in your retirement.

Like we said at the beginning - there’s no right or wrong answer to whether you rent or buy a home in retirement and the best option will be determined by your own personal circumstances and interests. But whether you decide to buy or rent a home in retirement, Sunbound is here to help you every step of the way.

Sunbound is the best way to pay for senior living. If you want to learn more about how Sunbound can help make senior living more affordable for residents and easier to manage for communities, email us at info@sunboundhomes.com or request a demo here. Sunbound is on a mission to make senior living more affordable for everyone.

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