Which is Better, Renting or Owning in Retirement?

The cost of living during retirement, especially when it comes to housing, is an expense that many retirees must monitor closely.

Financial markets fluctuate, cost of living expenses increase all the time, and personal life events can precipitate the need to adjust retirement plans.

Many retirees live on set incomes and have modest levels of financial worth. About 48 million Americans are 65 years old or older and their average annual income is $38,500.

Meanwhile, the average American senior citizen has an average net worth of $170,500.

Trying to navigate retirement with numbers like that can be extremely challenging. So, should senior citizens rent or own a home in retirement?

Many people own a home for years or decades. Home ownership becomes a point of pride for many people as they age, like a title or career path.

However, renting throughout can be more affordable for retirees and it offers flexibility during unexpected life transitions and emergencies.

Let’s examine the benefits of renting versus owning during retirement.

The positives and negatives of owning

Owning a home can offer you financial stability if you maintain your home’s value. If you own a greater share of your home relative to the remaining mortgage payments then you can leverage its equity when needed.

However, owning a home demands constant attention to maintenance costs, a mortgage, repairs, homeowner’s insurance, flood insurance, and property taxes, among other costs.

It could take months to sell a home if you needed to in an emergency. And since real estate prices are always volatile, you may end up selling at a lower price than you like.

The positives and negatives of renting

Renting involves less financial and physical demand compared to owning a home.

Renting also could allow you more opportunities to save money, invest and find new streams of supplemental income.

Unfortunately, there are no tax or equity advantages to renting. And you won’t be able to control increasing rent prices.

The biggest deciding factor in the rent versus owning debate is income. If you don’t have a healthy retirement savings balance and or a few reliable sources of supplemental income, then the state of your personal finances will make the decision for you.