You may have long pictured homeownership as a cornerstone of your retirement. But baby boomers are increasingly renting instead. From 2005 to 2015, the number of renters ages 60 to 64 nearly doubled, rising from 1.3 million households to 2.5 million, reports Harvard University’s Joint Center for Housing Studies.
Though the longer you live in a home the more likely it is that buying beats renting—taxes and upkeep, for one, are probably lower than the rent you’d pay—there are times when renting is the way to go.
Want to buy a home in your favorite vacation spot? The idyllic weeks you’ve spent there may not give you a realistic sense of what life is like year-round, warns University of Cincinnati real estate professor Michael Eriksen. Orlando’s 70°F winters, for example, might not be worth its humid 90°F summers. You could end up as what some real estate agents call half-backers—retirees who move a second time, to a place partway back home.
Trying out your new town by renting will save you money and headaches. “Real estate can have huge transaction costs,” says Eriksen, like the typical 5% brokerage fee. “You don’t want to pay it twice.”
You want the extra cash
Selling the family home and investing some (or all) of the proceeds can help pad your savings—and provide peace of mind, says George Gagliardi, a financial planner in Lexington, Mass.
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Yes, you could tap home equity via a reverse mortgage. But selling would supply more upfront cash. A 65-year-old with a $300,000 mortgage-free home could net $275,000 from a sale; a reverse mortgage would free up only $150,000, according to the industry site Reverse-Mortgage.org. You’d have to tap some of your proceeds to rent a new place, but the extra long-term cost of renting might be worth the comfort of more cash on hand.
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You want convenience
Sick of raking leaves? Don’t want to deal with peeling paint? Renting lets you off-load such chores, points out retirement author Sally Abrahms: “It’s not your problem anymore.” A rental in a multiunit building can also include amenities you’ll value more as you age, such as an elevator and a doorman.
Rental property developers have started catering to older customers, says Chuck Ehmann, an economist at real estate data company Axiometrics. The result: buildings that include a greater number of larger two- and three-bedroom units, as well as aging-friendly perks like door-to-door package delivery and trash pickup. Says Ehmann: “Some properties have maid service and restaurant delivery.” You don’t have to own your castle, it seems, to be treated like royalty.