Financial Planning, Retirement Issues


Rent or Buy in Retirement 

Rent or Buy in Retirement This is the big question for many people who are contemplating retirement and also thinking of downsizing. Should they Rent or Buy in Retirement? Should they sell their current home and purchase another smaller home that has a lower cost profile or should they invest their equity from the sale of their home and rent a place? This is a tough decision for many people on an emotional level as well as on a financial level. We will discuss some of the issues that consumers should consider when making a decision like this.

Rent or Buy in Retirement

Advantages

  • Mortgage interest write off
  • Property tax write off
  • Asset appreciation
  • Freedom to make changes as desired
  • Renting can mean a short term commitment to test a location
  • Renting might be cheaper – run the numbers
  • Moving into a brand new apartment with new amenities

Disadvantages

  • Repairs and maintenance of a home
  • Gaining access to equity can be difficult or slow
  • Selling a home can take a long time
  • Coming up with a down payment to buy a home
  • paying the mortgage each month
  • Landlord can change his mind and force you out
  • Apartment is unlikely to be upgraded over time
  • Leaving the family home can be difficult

Each person needs to evaluate each of these issues carefully and then makes the best decision for their personal situation. They also need to run the numbers for both scenarios to assess which one meets their financial needs. Build in inflation for things like rent increases, utilities etc to ensure that you do not get a big surprise.

 

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