Here at AgingOptions, as we walk people through the LifePlanning process, one of the issues we tackle is the question of housing. The great majority of seniors are firmly convinced that the ideal housing choice for them is the place they’re living today: surveys conducted by AARP show that nearly 90 percent of adults 65 and older want to age in place, in their current home. But seniors need to ask themselves at least two questions before deciding that staying put is the right strategy. First, will your current house be appropriate for you and your spouse as you grow older and develop more physical limitations? And second, is it possible that you might be better off in retirement, not as a homeowner, but as a renter?
Buy or Rent? Retirement Often Calls for Flexibility
We’ve written quite a lot about making homes safer for aging seniors, but the question of renting versus buying seems to get less attention. For that reason we were intrigued by this recent article from the Money website that lists what reporter Carla Fried says are the three reasons why renting a home can be smarter than owning a home when you’re retired. We pass this article along, not because we agree with every point, but because it provides good food for thought. “If you’re nearing retirement, it’s likely that renting is a distant memory,” Fried writes. “But if your retirement plan includes making a move, renting might be a sweeter financial and lifestyle fit.” She cites recent stats from Harvard University that, among households with someone at least 65 years old, roughly 80 percent own their home. “Yet retirement sometimes calls for flexibility, whether that’s the ability to downsize in your current location, relocate to be closer to the kids and grandkids, or chase better weather and/or a lower cost of living in another state. And these moves become harder if they necessitate putting your home on the market.”
According to the Money article, even though home ownership still dominates, a growing number of seniors are renting: one analysis showed that the percentage of all renters who are 60-plus increased by more than 40 percent between 2007 and 2017. Let’s consider the three reasons why renters may have an advantage, according to Money.
Buy or Rent? Renters Can Stretch Retirement Savings Using Their Home Equity
In researching for this piece, we discovered another Money article that contained this eye-opening statistic. “Homeowners age 62 and older hold a record $7.1 trillion in home equity, according to the National Reverse Mortgage Lenders Association. Yet their houses might not be well suited to aging in place.” Another Harvard University study showed that less than 4 percent of US housing stock incorporates what the article calls “three vital safety features for the elderly: single-floor living, no-step entries, and extra-wide halls and doors.” For those reasons, some planners suggest that now is the time to cash in. “If you have a boatload of equity in the home, selling today and renting means you could pile your gains from the sale into your pot of retirement savings,” Carla Fried writes. Among other benefits, this windfall might allow you to delay starting Social Security until age 70, thus maximizing benefits.
The Money article quotes one financial planner who advises, “When someone wants to retire and is on the edge of not being able to have the lifestyle they want or fears running out of money in their 90’s, I recommend they consider renting.” Others say selling sooner rather than later may be smart, while the markets are hot, especially here in the Pacific Northwest.
Buy or Rent? Don’t Underestimate the Cost of Home Ownership
Even if you own your home outright, living there is hardly free. Taxes, maintenance and insurance all represent escalating costs. Another planner quoted in the Money article said that the number one item missing from many retirees’ budgets is home maintenance: since it’s not a regular expense, it’s easy to lose track of how much it costs to fix or replace things around the house. It’s also important for seniors to be honest with themselves and admit that the home projects and chores they can handle today are going to get tougher in the future, and that will mean hiring household help, which adds to ownership expense. As for property taxes, they can rise precipitously depending on where you live, and new federal regulations have placed limits on how much state and local tax (including property tax) is deductible.
Buy or Rent? Don’t Overlook the Appeal of a Low-Maintenance Lifestyle
This sense of freedom from homeowner headaches may be the greatest appeal of all. There can be real peace of mind when replacements and repairs become the problem of the landlord or property manager, not you. “That can be especially true for single homeowners who don’t have a partner to share the work it takes to maintain a home,” says Money. The article recommends married couples give careful thought to how the surviving spouse will fare as a solo homeowner. Renting also lets you “test-drive your retirement life” if you’re considering relocating or just want to see what a retirement lifestyle is like. “This is a wonderful time to have flexibility,” said one planner.
Buy or Rent? Either Way, Housing is Only Part of the Retirement Picture
Where and how you’ll live in retirement is an important decision, but it’s critical that you avoid making housing decisions in a vacuum. All the elements of your retirement plan need to fit together, like pieces of a puzzle: housing choices, financial plans, legal protection, medical coverage and family communication. That’s why we at AgingOptions encourage you to join Rajiv Nagaich at a free information session called a LifePlanning Seminar. “LifePlanning” is our term for the type of comprehensive retirement plan that encompasses all the essentials in one overarching strategy. It will truly become the blueprint you need to build the retirement you’ve always hoped you would experience.
If you’re ready to learn more, without cost or obligation, the next step is simple: visit our Live Events page for a calendar of upcoming seminars, and register for the date and time of your choice. You’ll be glad you did! We’ll look forward to meeting you at a LifePlanning Seminar soon.
(originally reported at http://money.com)