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Owning vs Renting in Retirement

Owning vs Renting in Retirement

March 12, 2024

Is Homeownership Putting a Dent in Your Retirement Budget?

Housing is an expense most retirees can expect to pay for the duration of their life in retirement, along with other essential expenses, such as food, clothing, healthcare, transportation, and taxes. Whether you own or rent, housing can be expensive, and costs generally increase over time. For example, in 2023, the average annual cost of owning a home was $17,500, not including a mortgage payment. That’s up from $15,400 in 2022. Much of the increase is due to rising costs for homeowner’s insurance, real estate taxes, homeowner’s association dues, and labor and materials for performing tasks that many retirees no longer can or want to do, such as cleaning, landscaping, maintenance, and repairs.1 Rental costs also remain relatively high, with prices up from a year ago in 47 of the 50 biggest metro areas in the country. Providence, R.I. ranked the highest with an annual increase of 7.7%, while Austin, Texas ranked the lowest at -2.6%.2

Should you own or rent in retirement?
The answer to the question regarding rent vs. own depends on several factors. Owning your home offers more control over the property and allows you to continue building equity while remaining in your home and community. This can be a good option as long as your health and finances remain stable. However, unpredictable expenses and repairs can make home ownership challenging on a fixed income. The timing of a sale also matters. Ideally, you want to sell on your terms, not due to a health crisis, death or other circumstances that may require selling at an inopportune time. Typical costs associated with a home sale include real estate commissions and fees, negotiated repairs, cleaning, and moving household furnishings to your new location.

While these expenses can add up, selling frees up the remaining equity in your home, which can be used to bolster your retirement nest egg. Renting can boost cash flow, since you’re no longer paying a mortgage, real estate taxes, or expenses related to the upkeep of your property. Renter’s insurance premiums are also substantially lower than homeowner’s since you’re only insuring your personal property when renting. These combined savings free up more discretionary income to use for the things you enjoy, such as travel or entertainment. If you choose to relocate again later, moving is a much faster process without the negotiations and transaction costs associated with selling a home. However, rental costs can vary greatly, depending on the type and location of the property you choose. Renters also face the prospect of annual rent increases, which need to be factored into your retirement spending strategy. Renting may also impact your taxes if you previously itemized deductions for mortgage interest and/or real estate taxes.

If you need help determining whether owning or renting is the right option for you, or have concerns about cash flow in retirement, call the office to schedule time to talk. We're happy to help.

1Rearick, Brenden, “This Surprise Expense Is Likely to Upend Your Budget in Retirement (Hint: It's Not Health Care).” Nasdaq.com, 25 OCT 2023, https://www.nasdaq.com/articles/this-surprise-expense-is-likely-to-upend-your-budget-in-retirement-hint:-its-not-health.
2Helhoski, Anna, Rental Market Trends in the U.S. — Price Growth is Below Pre-Pandemic Rates.” Nerdwallet.com, 13 FEB 2024, https://www.nerdwallet.com/article/finance/rental-market-trends.


This information was written by KRW Creative Concepts, a non-affiliate of the broker-dealer.

This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera firms nor any of its representatives may give legal or tax advice.