It may seem like the perfect time to pack up your life and move into a retirement home. After all, you’ll no longer have to face the daily grind of full-time employment and the associated stressors that come with it. But before you automatically assume that renting in retirement is for you, it’s important to know what you’re getting yourself into.
If you plan to retire soon, then it probably won’t be long before you need somewhere new to call home. And with an affordable rental market in most U.S. cities, today now may be the best time ever to buy instead of rent. However, if you haven’t yet made up your mind about retirement or whether or not it’s even for you — then renting could end up being the right fit for you too.
Read on these 4 issues most people face while deciding either to rent or buy an apartment.
1) Is Renting in Retirement Still a Good Idea?
Retirement is a great time to make a transition to a lower-stress lifestyle. If you haven’t yet made the switch to a more relaxed lifestyle, renting in retirement may be the right move for you. But if you’re already in the mode of letting go of the daily grind of work, renting may not be the best idea. With the retirement income you receive, you’ll have more time to explore new hobbies and spend more time with family members.
You might even take a trip or two with your spouse or significant other. If you’re still stressed out from the demands of employment, you’ll probably have a difficult time adjusting to a less-demanding lifestyle. And if you don’t make that adjustment, then you may find yourself back in the workforce at some point down the road.
2) What Are the Differences Between Renting and Buying in Retirement?
Renting and buying a retirement home can both be financially beneficial, but there are some important differences between the two. When you rent a home, you generally pay a monthly fee and are not legally obligated to remain in the home for any specific length of time.
If you decide you want to move, you can simply find a new place to rent. If you decide you don’t want to rent anymore, you can simply stop paying the monthly fee and move out. Buying a home in retirement, on the other hand, typically involves paying a large upfront cost to purchase the home.
Then you are legally obligated to remain in the home for the length of time that you have agreed to purchase it for at the price you paid. So if you want to move in a few years because you find yourself wanting a change of scenery or you simply decide you don’t like the area any longer, you can’t do so easily.
3) How to Tip the Scales in Favor of Renting
Before you jump into the decision to rent or buy in retirement, you should give some serious thought to how you want to invest your money. If you plan to invest a significant portion of your post-employment income into stocks and/or bonds — which are the two most popular investment types — then renting could end up being a good choice for you.
A good way to tip the scales in favor of renting is to ensure you don’t have a large portion of your retirement money tied up in stocks and/or bonds. Investments are a vital part of any financial plan, but if you have a significant amount tied up in them, then you may have a difficult time turning that money into cash in retirement if you need it for other important expenses.
4) What are the Disadvantages of Renting in Retirement?
Renting is generally a cheaper option than buying a home, but there are some disadvantages to renting as well. If the renter in your life moves out early, stops paying rent, or simply doesn’t want to be a landlord, you’re stuck with that person and their responsibilities.
If your rental property experiences any major issues (such as a broken window or water leak), then you’re required to take care of it. If you don’t, then you may end up losing your financial investment. And if you want to move out but don’t have enough money saved to pay the difference, you’ll be stuck with a home you don’t want to be in.