Renting in retirement is a common choice for many people. They don’t have the financial means to buy homes. Financial planners agree that renting is more sensible than buying in certain circumstances, even for those who can afford homeownership.
Renting allows you to be flexible and free from the hassles and costs of owning a home. You may also find communities to socialize and accessible housing features like one-floor living. This can allow you to age in place. People who are cash-poor and house rich can sell their homes to raise equity and fund a better lifestyle.
Lisa A.K., certified financial planner, says that while many retirees don’t want rent, it can be a wise decision for a variety of reasons. Kirchenbauer, Arlington, Virginia.
Rent if you are in transition
Financial planners recommend renting your first home if you are moving to a new location. This will allow you to see the pros and cons of each area. Delia Fernandez is a certified financial planner from Los Alamitos. She says that you will need to take the time to locate new doctors, find entertainment venues, locate your favorite restaurants, and set up support services.
“It’s a good idea to rent for a year or more so that you can get to know the area and find the right place for you,” she said.
If you plan to move within the next few years, renting is often a smart choice. Selling and buying a home is costly. Your home might not appreciate in value quickly enough to cover the costs. A downturn in real estate means that selling a house may take longer than expected, which can add stress and delay to your move.
Renting could make you live more comfortably and peacefully
Many homes are not accessible to those with mobility issues or other age-related disabilities. It is possible for your house to be modified, but it could prove prohibitively costly. You may find newer apartments that offer elevators, ramps, one-floor living, and other amenities to help you stay safe as you age.
According to the Centers for Disease Control and Prevention, loneliness and social isolation are also risks that you should consider. These can have a significant negative impact on your health and wellbeing. Apartments are a great place to meet people and have a safe space where they can interact with each other. According to Sara DeSantis (personal finance educator in Denver), rental communities for older adults often provide classes and organized activities that help people connect.
A continuing care retirement community (or CCRC) is another option for those who have the means to afford it. This allows you to live in one location even if you need more care later on. These facilities are for people who can live independently and are healthy. They offer the promise of skilled nursing, assisted living and memory care services. CCRCs usually charge a large one-time fee. The average cost was $379,606 for the fourth quarter 2022 according to the National Investment Center for Seniors Housing & Care. Monthly fees are also charged to residents, which can increase depending on the level of care received. The median monthly rent was $4364, NIC found.
Renting could allow you to tap more equity
According to Nicholas Bunio, a certified financial planner from Berwyn, Pennsylvania, many people reach retirement without sufficient savings. They need to tap their home equity to supplement their income. Bunio points out that two common methods of tapping equity are to sell a house and buy a cheaper one or use a reverse mortgage. However, these options may not be enough to free up enough money to significantly improve your financial situation.
Bunio states that if you rent out your house, you will have a large amount of cash to pay the rent.
Dealing with rent increases, and other uncertainties
Many retired people fear that rents will rise if they have a fixed income. Retirees need to remember that rents are not the only housing cost that is subject to inflation. Crystal Cox, a Madison certified financial planner, said that even if you have a fixed rate mortgage, there is a good chance that your property taxes, homeowners’ insurance, and the costs of maintaining and repairing your property will increase each year.
Bunio states that renters can reduce the chance of rent increases by choosing longer leases. Fernandez points out that “mom-and-pop” landlords might be more open to renting than large corporations. Being a star tenant can also help.
Fernandez states that landlords love people who take care of their properties and make maintenance simple.
Eviction is another possibility. A landlord may decide to end your tenancy, even if you are able to pay the rent. For example, they might sell the building.
DeSantis points out that homeowners can be affected by potential dislocations. Because they are no longer safe at home, many older adults must move into assisted living. She suggests that people move to supportive housing as soon as they are able to handle the transition.
DeSantis states that you should make the decision sooner than it is forced upon your.
This article is by NerdWallet. It was originally published in The Associated Press.