Should You Buy or Rent in Retirement?
Your nest is now empty, and retirement is right around the corner. You’ve got plans. Perhaps plans to travel, garden, or even write. Whatever your plan, you now seem to have plenty of room. You may even think about downsizing to a new home. If that scenario has crossed your mind, you probably wonder about the pros and cons of homeownership versus renting during retirement. If this sounds like you pondering aloud, take the following into consideration.
Consider the Norm
If you consider a move, you should know that the majority of retirees do own their own home. It is estimated that 90 percent of all retired married couples own their home outright, according to the U.S. Census Bureau. However, couples who are about ten years away from retiring do not. This group of individuals are either paying off a mortgage or renting by choice. Many individuals feel like having a mortgage during retirement years is rather freighting. Living on a fixed income trying to pay off a home can sound rather taxing at best. However, renting is even more daunting—especially since rent goes up over time. With a fixed rate mortgage, your payments are just that—fixed. While your property taxes and insurance may go up over time, the rate will most likely be much smaller than a rent increase.
Cashing in Your Nest Egg
Some individuals start to figure out that their retirement savings isn’t quite as big as they need. Thus, several retirees look at their home as a solution. If you do own your home outright or have equity, you may want to consider downsizing. This type of move may free up cash to use as other investments that can help you bridge your retirement gap. If this is an option, work with an accountant to see how much additional income a move could generate. You may find that giving up a spare bedroom is worth thousands.
Plan to Stay Put
If you plan to move and stay put, you are better off to purchase your home. Depending on exact numbers, most rent vs. buy calculators start painting a much better picture for owning your home over renting. Years four through six are typical for positive equity growth. Although, if you purchase outright, you’re in a much better position. Talk with a real estate agent about your options. They may just show you that perfect retirement bungalow.
For more of our perspective on this subject read our recent blog, “Helpful Tips for the Multigeneration Household Scenario.”
Thinking of buying or selling a home in the La Jolla area? As consistent top producers in real estate, Linda Daniels and The Daniels Group are your La Jolla housing specialists. Working with The Daniels Group will give you with the advantage of having local experts to ensure that you have a successful real estate transaction. From buying, selling and investing to financing options and more, we have the expertise and resources to help you achieve your goals. Call us today at (858) 361-5561 or email us anytime by clicking here.