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Should You Rent or Buy a Home When You’re Retired?

rent or buy a home when retired
Why More Retirees Are Enjoying the Perks of Renting

One of the biggest financial questions near-retirees must answer is what their living situation will look like in retirement. Many choose to move closer to friends or family, while others move simply to downsize. In addition to location and square footage, however, it’s also important to make the decision between renting or buying. Though it may come as a surprise, renting in retirement has become a growing trend. In fact, since 2005, the largest growing group of renters has been people in their fifties and sixties.

Renting may be a growing trend, but how do you know if this is the right decision for you? There are several factors, both emotional and financial, that you’ll need to take into consideration. To help you explore your options, we will discuss several of these factors below, including crunching the numbers, creating cash flow, and the freedom of movement.

Currently, around 47% of homeowners move out of the home they were living in when in their fifties. There are plenty of reasons to stay put; you might be living in your dream house or love the ever-present projects that come with being a homeowner. If that’s not you, though, consider that there are many good reasons to move, too. You may want to spend your retirement closer to friends or family. You may want to downsize or enjoy a more comfortable climate. For some retirees, close proximity to hospitals and other amenities is important. Whatever your reasons for moving, it’s quite possible that renting will serve you better than buying.

Crunching the Numbers on Downsizing

If you are considering moving in retirement, there’s a good chance that it’s because you have decided that downsizing is the right move for you. It’s common to feel like the home that used to serve you so well is now more house than you need. Routine cleaning and maintenance, climbing stairs, landscaping the yard, and filling more rooms than you know what to do with can zap your energy and keep you from enjoying your retirement. Consider this, though: Do you need to buy or is renting a good option for you?

One factor to look at is how long you think you’ll be staying in your new place. If you are only there for three to four years, you can run the risk of losing out on an investment when you decide to move again. Depending on the market, your new purchase may depreciate. This is where having professional guidance comes in handy. Financial advisors can help calculate the market trends in your desired location by comparing rental fees against price trends in the housing market. This helps you make the important calculation of how many years you’ll need to stay in your new home in order for it to garner a positive financial outcome.

SEE ALSO: Which Assets Belong in Your Living Trust – and Which Don’t?

Creating Cash Flow

Depending on how sufficient your retirement savings is, selling your house and becoming a renter can be a necessary strategy for healthy cash flow. Buying a home is a long-term investment, and retirement is the time to cash in. Entering into another long-term investment through purchasing another property may not be the best use of assets. By selling your house, you are freeing up equity, and if you are still paying a mortgage, you are freeing up even more equity in the sense that your monthly bills will decrease.

Having the equity from your sale gives you the option to use it for investments. Putting a portion of it into the market can create a modest income stream you can rely on. By becoming a renter, you’ll also save on maintenance and general property upkeep. If something breaks, you’ll simply make a phone call to the landlord or management company. You won’t have to worry about homeowner association fees either, which can be a significant savings as well.

Gaining Freedom

Traveling is one of the most frequently cited activities for retirees, and it makes sense. With so much more time freedom at your disposal, it’s an ideal time to see the world and take the trips you’ve always wanted to take. This is another scenario in which being a renter provides more flexibility. When the travel bug bites, you can jet-set to your preferred destination without making many of the arrangements for care and maintenance that come with owning your own home.

While no one likes to think about losing the ability to live independently, it’s possible that you or your spouse or partner may need to live in a nursing home or long-term care facility someday. If you own your home, you would have the added stress of trying to sell it while also making big decisions about medical care. Renting can provide a bit more freedom in this scenario, too.

SEE ALSO: 401(k) 101: Six Things You Need to Know Before You’re 50

Tips for Those Moving in Retirement

Moving is a big decision – especially if you’re looking for a place to spend your retirement. Make sure when you are looking into a new area that it has all the amenities you need. Whether you are planning to rent or to buy, it’s a good strategy to rent in the area for a little to make sure it’s the right fit for you. There are plenty of stories about retirees who moved to their dream locations only to realize it was the perfect place for them to vacation, but not the perfect place for them to live. When you’re getting to know a new area, take time to explore the community, the cultural offerings, the restaurants, and the medical facilities.

To Rent or Not to Rent

While there are certainly positives to remaining in your home once you retire, there are persuasive arguments for choosing to sell and become a renter, too. In the end, it comes down to both personal preferences and financial considerations. The information above can serve as a good starting point for a conversation with your family and your financial advisor as you work to determine your ideal retirement lifestyle.


Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

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Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.