For many decades, the “American Dream” for retirement involved paying off your mortgage and living in the family home for the rest of your days. But now, many retirees are choosing to sell off their old homestead and rent a new place instead. If you’re wondering why anyone would rent, rather than own their own home in their later years, you might be surprised at the reasons.
No maintenance and upkeep costs. Even if you don’t have a mortgage payment, the cost of maintaining a large home can be prohibitive. On top of that, you might have to pay homeowners association fees or high property taxes. Renting your place of residence means a landlord is responsible for all upkeep, and you won’t have to deal with extra fees.
Tap into your equity. If you have built up quite a bit of equity in your home, cashing it out can offer you greater financial freedom in retirement.
Renting lends itself to more freedom. Some couples prefer to move around during retirement, living in one area for six months or a year before moving somewhere else. If you plan to travel a lot, it doesn’t make sense to maintain a full-time residence!
It can prevent problems with selling your home later. You might worry about covering the cost of a nursing home, along with saddling your children or spouse with the task of selling your home one day. If you sell your home and rent instead, you enjoy greater flexibility if you ever need to move to a senior living center or nursing care facility.
You can try a new area before investing in it. You might dream of moving to a new location in retirement, for reasons such as climate, lower cost of living, proximity to grandchildren, or availability of recreational activities. But you can never be certain of whether you will really enjoy such a drastic lifestyle change. Since it’s a gamble, taking a year or two to rent in the area first is a wise idea.
Of course, there are also plenty of good reasons to stay in your current home. In particular, you might be waiting for real estate values to rebound before selling the property. But since housing is the number one expense for most people, this is an issue to consider carefully when you retire. For more information on retirement income planning, call us to schedule an appointment. We can help guide you to make the decisions that are right for your unique situation.
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