For years, the standard plan for retirement was to pay off your mortgage and continue living in your family home, or perhaps sell that home and pay cash for a smaller home, possibly in a retirement community.
But that plan has changed in recent years, as some retirees have joined their millennial children and grandchildren in choosing to rent rather than buy. While their reasons vary, the trend indicates that renting is losing its stigma and that, for some older people, renting makes good economic sense.
“Before, there was always a stigma in renting,” says Mari Adam, a financial planner in Boca Raton, Florida. “That’s really changed.”
Before you decide that renting is a better option, get some real information about what your budget will cover, suggests Walter Updegrave, author, journalist and publisher of the website Real Deal Retirement.
“The question comes down to how strong is the rental market in your area,” Updegrave says. “In a lot of cities, rents have been going up quite a bit. … What would you really have to pay for something acceptable or comparable to what you live in?” Plus, he says, you are going to have to plan for the possibility that your rent will rise every year.
That makes it important to examine rental options in the area where you want to live before you decide to forgo homeownership, so you’ll know what compromises you may have to make to find an affordable rental. “It’s a very complicated decision, and it’s very emotional,” says Liz Weston, a personal finance columnist and author. “There are a lot of places where it’s cheaper to own if you’re just looking at the mortgage payment.”
Here are seven reasons to rent in retirement.
You want to try out a new area. Many people fantasize about moving to Florida or Arizona or even another country when they retire. But those places are big lifestyle changes for many, and some people discover that the land of mosquitoes and endless summer is not for them. Plus, it’s hard to choose a neighborhood when you don’t know the city. Renting gives you an opportunity to try on a new lifestyle and check out neighborhoods without committing. “If you’re relocating … I think it’s a good idea to test the waters by renting,” Updegrave says. “You may want to rent for a year to get a sense of whether you like the area as well as the specific neighborhood you’re in.”
You expect to move soon. If you sell the family house and expect to need assisted living within a few years, buying a home to live in for a short time may not make sense. Or perhaps you’re planning to move closer to children in a few years, but you want to stay in your hometown a little longer. Renting makes it easier to move quickly. “It’s hard … to really look ahead and know when are those transition points,” Adam says.