There are many positive financial and lifestyle reasons for downsizing your residence when you retire. Here are a few good reasons to become a home renter, not a home owner, in retirement.
Your home is a lousy investment. Single family and condominium home values have fallen precipitously in recent years. And there seems to be no end in sight for this negative trend. The equity that you have in your home now may disappear rapidly. If you are fortunate, the value of your home may remain stagnant. In either case, that home equity can be put to better use in a safer investment that will provide at least some positive return and retirement income.
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Home maintenance is expensive and time consuming. Experienced homeowners are fed up with yard work, painting, worn carpeting, appliance repairs, and leaky roofs. Renting eliminates the time and precious dollars that are wasted on these maintenance problems that are inherent to home ownership. Renter’s insurance is much less expensive than homeowner’s insurance. The property tax bill also disappears. Utility costs will also generally decline if you pass the buck–literally–to a landlord.
Home ownership ties you down. Owning your home tends to anchor you to a fixed location. If you rent and get tired of where you are living, you don’t have to go through the trouble and expense of selling. If your children move across the country and you want to relocate to be closer to them, you have an easy option: Don’t renew your lease. If you want to travel extensively or be a snowbird, you can rent an apartment–even furnished–on a month-to-month basis and then just leave when you are ready. As a renter, you also have more control over your budget. Your shelter costs are more predictable. If your financial picture changes, you can more easily upgrade or downgrade your accommodations to compensate for those changes.
Homeownership as a lifestyle goal has been embedded in our culture by lenders, builders, real estate brokers, and government intervention. But many people have experienced the downside of the real estate bubble. Retirement planning is a good time to objectively reconsider the comparative wisdom of renting versus owning.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.