Renting in Later Life

 

I recently had an opportunity to answer a reporter’s queries about Baby Boomers’ increasing preference for renting instead of owning a home. Below are questions that I responded to and my responses:

Increasingly people in their retirement years are considering renting instead of buying when selling their homes. Could you explain some of the dynamics behind this trend?

 

As described by Newsweek, over the past decade, the number of renters aged 65 and older has grown by nearly 30%, adding millions of senior renters nationwide. Reasons for renting in later life include:

a  - Flexibility in housing locations (e.g., sell a house and rent a dwelling that is nearby to family)

b - Selling a house to generate a profit that provides capital to use for future living expenses

c - Avoiding home maintenance tasks (e.g., lawn care) and expenses (e.g., a new roof)

d - Relocating to a new state for better weather or lower taxes and not wanting new homeownership burdens

e - Reducing expenses by eliminating property taxes, insurance, maintenance, HOA fees, utilities, etc.

f

Are there things you think people should consider when deciding whether to rent or buy in their later years, including to ensure long-term financial security? What are some of the considerations?

First and foremost is the math. Is renting less expensive compared to the total cost of homeownership? Also, the length of time expected to stay somewhere. Buying generally makes more sense when someone expects to remain in a home for many years. Renting can be more attractive when a move may be likely within a few years. 

Finally, financial peace of mind. Some people value the control that comes with owning a home. Others value flexibility and freedom from home maintenance. Nonfinancial factors can be very important in retirement housing decisions.

 

Could you give concrete examples of the pros and cons of renting vs. buying?

Renting Pros- No home maintenance responsibility, flexibility to move, less money required upfront, and no risk of losing money because of a decline in home values.

Renting Cons- Rent can increase over time, no home equity accumulation, less control over the property, and lease restrictions may limit changes to home.

Homeownership Pros- Builds home equity over time, mortgage will eventually be paid off, potential for home appreciation, tax benefits (if you can itemize deductions), and home can be sold or passed on to heirs.

Homeownership Cons- Requires a substantial upfront down payment, homeowners are responsible for maintenance, less flexibility to relocate, and home values can decline.

 

Concrete Example #1: Me. Husband and I have owned three houses in 48 years. First home in New Jersey was bought for $50,000 in 1978 with a VA mortgage. High mortgage APRs were in effect at that time, but we jumped in. Current home in Florida is worth around $550,000. No mortgage. We plan to stop being homeowners in 2033 and move into a continuing care retirement community (CCRC), a.k.a., life care community. At that point there will be no more home maintenance, HOA fee, homeowner’s insurance, etc. We will no longer be homeowners.

 

Concrete Example #2: Many neighbors in my 55+ community say they are tired of being homeowners and talk about moving into apartments or condos near family or into CCRCs. At that point, lawn care, termite service, and home maintenance tasks will go away.

 

Anything else on the topic you'd like to share?

Make sure that housing costs (renting or buying) are sustainable for life without depleting savings that you may need for healthcare, emergencies, and other necessary expenses.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.