Are you in the process of planning for your retirement? Of course, you will want to take steps to save money for retirement, but you also need to have a plan, Part of that plan should involve determining where you want to live and how. A common question asked by soon-to-be retirees is “Should I rent or should I own?”
When it comes to determining if you should rent or own a home during your retirement years, it can be difficult to make a decision. Why? Because every situation is different. That is why you should first examine the pros and cons of each.
As for owning your own home, the biggest benefit of doing so is the equity you are provided with. This can give you security in your older age. Renting a home or an apartment does not provide you with any security at all.
In the aspect of security, owning a home is typically advised, especially one that is already paid for. Should you find yourself short on retirement money later on, you can always sell your home. The money that you profit can be used to relocate to a smaller home or you could consider renting instead.
The biggest downside to owning a home is the costs associated with doing so. When planning to retire or when in retirement, the last thing you may want or need is a mortgage to pay. With that said, remember that you do receive benefits. The interest rates on your mortgage can be used as a tax deduction. This can save you a small, but meaningful amount of money each year.
If you are the sole owner of your home, like if your mortgage is already paid off, do not make the mistake of assuming that you are free and clear. There are still expenses that you will need to account for in your retirement years. When you own your own home, you are responsible for all taxes, including both school and property tax. When you rent an apartment or a home, you are not the individual responsible, as these should already be included in the cost of your rent.
When comparing renting and owning a home in your retirement years, maintenance and renovations should also be taken into consideration. If you are 70 years old and your house needs a new roof, would you be able to afford the cost of it? You must be able to do so if you want to continue living in retirement safely and comfortably. As for renting, many renters receive reassurance and security because they are not the individuals in charge of making or paying for needed repairs and renovations.
One downside to renting a home or apartment is cost increase. Your rent can increase at just about any point in time. In most states, unless your lease states otherwise, rent can be increased with 30 days notice. Even so, most leases are only for one year, meaning your landlord can raise your rent then. In fact, your landlord can raise your rent to any amount that they want, even an amount that you cannot afford.
So which decision is best for you? Costs should be examined. If you live in an area with high rental rates, it is best to stay in your own home or even buy a new home. When making your decision, examine the long-term costs of each. Remember that rent can increase, while fixed rate mortgages do not.
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