• February 5, 2024
  • Posted by General Electric Credit Union
  • 3 read

Renting vs. Owning a Home in Retirement

Between 2006 and 2016, the portion of renters in their 60s increased by a whopping 84%.1 If you’re a retiree that currently owns a home, you may be considering selling it and moving into a rental property. There are many factors that should go into your decision making. This guide expands on a few of them so you can decide between renting or owning a home in retirement.  

Renting in retirement 

The benefits

  • Potential cost savings. Some retirees opt to sell their home because they simply can’t afford or rationalize their existing mortgage payment. In over half of the country, renting is less expensive.2 Research rental opportunities in your area and compare them to your current home costs to confirm if that’s the case in your area. And keep in mind that the cost of rent can increase over time, too. 
  • Convenience. You may not want to deal with—or feel safe handling—tasks like shoveling snow, changing a light bulb, or mowing the lawn. Landlords or property management companies are typically responsible for upkeep and issues both on the interior and exterior of their properties.  Additionally, you may live alone and want less home to take care of. Downsizing to a smaller rental property may make more sense. 
  • Flexibility. Renting gives you more flexibility to relocate, as the length of most apartment leases is a year. Some landlords may even allow you to go month-to-month. You can quickly act on a sudden desire to move south, across town, or to a different property!  

The drawbacks

  • Less control. Not all landlords or property management companies are created equal. If you do decide to rent, it’s crucial to read reviews from past renters if they’re available. This may tip you off to customer service or property issues, leading you to look elsewhere. Regardless, though, you’re dependent on someone else to handle things for you. That means tasks get done on their schedule, not yours.
  • No opportunities to build equity. The rent you pay monthly benefits the property owner, not you. You’re paying for the convenience that comes with renting, not toward the principal on a mortgage loan. Consider keeping your home if you want to take advantage of home equity borrowing options.
  • Fewer design options. Many property management companies don’t allow renters to paint the walls in their home or make any permanent changes. This gives you fewer options to make a space feel like your own. 

Owning a home in retirement 

The benefits

  • Stability and security. Retirees often seek a stable living situation, and having a home eliminates concerns about rent fluctuations or the possibility of eviction. This stability contributes to a more predictable and stress-free retirement.
  • Equity. Financially, owning a home can be an asset. Over the years, real estate has historically appreciated in value, allowing homeowners to build equity. The accumulated equity can be a valuable source of funds for unexpected expenses, healthcare costs, or other financial needs in retirement. Retirees can use their equity to borrow for less and fund home upgrades or repairs
  • Cost savings. Once your mortgage is paid off, you may only have to contend with property taxes, insurance, and maintenance costs, which can be more predictable and potentially lower than fluctuating rental prices. This financial relief can free up funds for other aspects of retirement, such as travel, hobbies, or leisure activities.
  • Tax advantages. There's a mortgage interest deduction that allows homeowners to deduct the interest paid on their mortgage, reducing their taxable income. Furthermore, the one-time capital gains exclusion on the sale of a primary residence (up to $250,000 for individuals or $500,000 for couples) provides an additional financial benefit.
  • Freedom. Barring certain local or HOA restrictions, you can do virtually whatever you want to your property. Rip up old carpet and install hardwood, build a deck, or paint your interior every color in the rainbow. When you’re a homeowner, you have the freedom to do as you wish.  

The drawbacks

  • Unexpected expenses. Homes can be prone to unexpected issues like plumbing problems, roof leaks, or foundation issues. These unexpected expenses can strain your financial resources, especially if you haven't budgeted for such contingencies.
  • Maintenance and upkeep. Homeownership comes with ongoing maintenance and repair expenses. As homes age, the need for repairs and upgrades increases. Retirees might find it challenging to handle the costs and physical demands of maintaining a property.

Whether renting or owning a home in retirement is right for you will depend on your unique needs and financial situation. Consult a financial advisor to help you determine the best option for your long-term security. General Electric Credit Union (GECU) members can schedule a no-cost consultation with Investment Services, available through CUSO Financial Services, L.P. (CFS).3

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