The benefits of home ownership have been emphasized so strongly through the years that few of us question the notion that it’s always better to buy a home than to rent one. But every so often a financial expert comes along who challenges that conventional wisdom. This recent article from the USNews website is a great case in point: it’s all about why a growing number of baby boomer retirees are making the choice to rent. The arguments in favor of being a tenant instead of an owner are pretty compelling.
Between 2006 and 2016, according to a Harvard University study of U.S. Census data, roughly one in eight homeowners between the ages of 65 and 74 made the switch from being owners to being renters. During that period the number of renters in their early 60s actually shot up by 84 percent, the fastest rise of any age group. Apparently, says USNews, while “some retirees want to continue to live in their own home as long as possible,” there are others who are “attracted to the convenience and flexibility of renting.” Before you dismiss this notion as counter-intuitive, let’s consider some of the reasons why these “new” renters have made the choice they did. The USNews analysis cites at least seven arguments in favor of getting rid of the mortgage and replacing it with a renter’s agreement.
- Escape from home maintenance: The yardwork and routine chores that can help make home ownership satisfying when you’re younger can be a difficult if not impossible burden as you age. Even something as simple as changing a light bulb in a ceiling fixture is made more difficult with the onset of poor balance and arthritic hands. One of the basic reasons to rent, not own: when something needs fixing, mowing, replacing or upgrading, you can call someone else to do it.
- Enjoy an age-friendly home: Here on the AgingOptions blog we’ve written several articles about helping seniors age in place by making homes more age-friendly. This can be a good strategy for some – but for others the expense of a remodel or the basic design of the house makes these upgrades impractical. Moving to a rental means seniors can find the safety features and floorplan they need.
- Move closer to services and amenities: The move back to the cities is a marked reversal from the way things were some decades ago during the mass migration to the suburbs. Today many people, especially active seniors, want to live in walkable neighborhoods served by good transit and offering easy access to grocery stores, banks, pharmacies, libraries, doctors’ offices and the like. Rising costs and scarce land have made renting the primary option for those looking to live in these desirable “new urban” communities.
- Try out something new: Some of the rising number of boomer renters have decided to rent for a few years in order to try out a new neighborhood or a new city. Before you buy that so-called retirement dream home, try renting first – so your dreams don’t turn into nightmares. By renting you’ll know what you’re getting yourself into.
- Save money: This is continuing point of contention among the money gurus: is it ultimately a smarter money move to rent or buy? (A recent example of this debate was this article in USAToday in which financial adviser and writer Ken Fisher lays out his pro-renting argument: it’s called “Why Your Home is a Worse Investment Than You Think.”) No matter what your opinion on this question, for most people it’s far cheaper to get into a rental than to qualify for a home purchase. On top of that, there are powerful reasons why it can be extremely unwise for retirees to continue paying on a mortgage.
- Cash out their equity: Millions of people are facing retirement with insufficient savings – yet they often have substantial home equity. There are a few good ways to tap into this equity, depending on one’s circumstances, but for many the temptation is powerful to sell the home, bank the equity and rent a different place. This can be a big boost to financial security in retirement if done correctly.
- Soften the blow of living alone: For many seniors, the idea of remaining in their family home after the death of a spouse is an impossible burden, both emotionally and practically. Those who prefer independent living can find a combination of privacy and community by renting an apartment or townhome in which seniors find sociability in an age-appropriate setting.
This is far from an exhaustive list, but it does cause us to pause a bit and acknowledge that renting can be the best choice for millions entering their retirement years. There’s no doubt that choosing the type of housing that’s best for you is a critical factor in retirement planning, based on your finances, your health, your preferences and your family dynamics. But remember this: housing is just one aspect of planning for a secure and fruitful retirement. Without a resilient financial plan, a protective legal plan, an affordable medical plan and a crystal-clear plan to communicate with your family, your housing preferences can quickly evaporate. All these aspects must work together for your plan to be truly successful.
That’s the philosophy behind an AgingOptions LifePlan. And it’s a powerful reason why you should accept our invitation to join Rajiv Nagaich at an upcoming LifePlanning Seminar. At these popular events, people just like you bring their retirement questions and learn firsthand how a LifePlan will make their retirement dreams come true. Rajiv would love to welcome you! Simply click here for dates, times, locations and online registration for all the upcoming LifePlanning Seminars. If you have questions or need assistance, we invite you to contact us during the week.
Housing, medical, financial, legal, family: you have a lot of choices to make in retirement. Don’t try to go it alone – let us be your guide. Age on!
(originally reported at http://money.usnews.com)