Before the start of the recession, retirement was viewed as an opportunity to enjoy the fruits of one’s labor. If a home is not owned free and clear without a fixed mortgage rate, the fluctuation in rates and other unforeseen circumstances can quickly eat at one’s savings. With all of the possible scenarios that could happen in retirement, some retirees are asking if it’s better to rent a home than own.
In a study of older Americans it was found that those who own their homes are more financially secure and generally experience fewer impediments to good health than their peers who rent. Renters often have difficulty renovating their spaces and have to worry about increasing rents.
There are situations where signing a lease beat a mortgage. Some retirees view renting as a new form of flexibility. Trying out a new location, especially to locate near family, is a common reason for the lifestyle change.
Many retirees are looking for the same experience as their Millennial children: living in an all-inclusive place where they don’t worry about ongoing home maintenance. Renting an apartment might be best for those that want to live walking distance of cultural activities, shops and restaurants.
For those with insufficient retirement savings, renting is a good option that does not tie up money in a house, as that asset appreciates at a slow pace.
The study also revealed that those who can afford it and are planning on staying in a place for the long haul are better off owning than renting. With an estimated 47 million households of residents 55 and older, 80% are homeowners. A surprising statistic reveals that 44% of renters 65 and older spend more than 30% of their annual gross income on rent. Those paying mortgages only pay on average a monthly amount equal to 16% of their annual income.
Renting for a short period of occupancy makes sense, but for the long term, home ownership is more practical.
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