Rent doesn’t have to be a four-letter idiom for retirees. Some experts say renting is a smart choice.

Financial Planners

Liz Weston

Why you should consider renting after retirement

This article is reprinted with permission from NerdWallet.

Some people rent when they retire because they don’t have many options. They can’t afford to own a house. But financial planners say renting rather than owning makes more sense in some circumstances, even for retirees who can afford the cost of owning a home.

Renting not only offers flexibility, it also frees you from all the chores and expenses of maintaining a home. Renting may also offer accessible housing features such as one-floor living that can help people age in place, as well as provide built-in communities for socializing. People who are “rich in their homes and short on cash” can sell their homes and use their equity to fund a more comfortable lifestyle.

Lisa AK Kirchenbauer, a certified financial planner in Arlington, Virginia, said:

Consider renting if you’re in transition

When moving to a new area, financial planners often recommend renting first to better understand the pros and cons of different neighborhoods. Finding a new doctor, checking out entertainment venues, finding your favorite restaurants and setting up other support services can take time, says Delia Fernandez, a certified financial planner in Los Alamitos, Calif. .

“It probably makes sense to rent for even a year, so you can dig deeper into the community and find what works for you,” she says.

Renting is wise if you plan to move again in the next few years. Buying and selling a home comes at a cost, and your home’s value may not rise fast enough to offset these costs. Also, selling a home can take longer than expected, especially during a real estate downturn, which can add stress, delays and additional costs to your move.

Also, MarketWatch: I’m 66 and have over $2 million. I just want to play golf. Can I retire?

Renting helps you age more safely and calmly

Few homes are truly accessible for people with reduced mobility or other age-related disabilities, and remodeling your current home can be prohibitively expensive. Newer apartments can be provided with ramps, elevators, one-floor living, and other amenities to keep them safe as they age.

According to the Centers for Disease Control and Prevention, social isolation and loneliness are other risks to consider as they can have a significant negative impact on the health of older adults. We can provide a community of people who can. Senior rental communities often offer organized activities and classes that help people connect, says Sarah DeSantis, a personal finance educator in Denver.

Another option for those who can afford it is the Continuing Care Retirement Community (CCRC). This allows them to stay in one place, even if they need more advanced care later. People usually move to one of these facilities when they are healthy and able to live independently, and as they get older they gain access to assisted living, skilled nursing, and possibly memory care services. . The CCRC usually charges his one-time admission fee which is hefty. The average for the fourth quarter of 2022 was $379,606, according to a research group, the National Investment Center for Seniors Housing & Care. Residents also pay a monthly fee that typically increases with the level of care. According to NIC research, the average monthly rent was $4,364.

READ: ‘We have become a rental nation’: Landlords benefit from high house prices, but millions of renters are in trouble

Leasing could help leverage more equity

According to Nicholas Bunio, a certified financial planner in Berwyn, Pennsylvania, many people enter retirement without enough savings and need to use home equity to supplement their income. His two common ways of using equity—selling the house to buy a cheaper one or taking a reverse mortgage—may not free up enough cash to make the situation much better. There is, Bunio points out.

“If you sell the house and pay the rent, you have a lot of cash to cover the rent plus the extras,” says Bunio.

See also: Pros, Cons, and Challenges of Joining the 55+ Retiree Community

Dealing with uncertainties such as rent increases

Many retirees understandably fear that having a fixed income could significantly increase their rent. But retirees should keep in mind that rent isn’t the only housing cost affected by inflation. Even if you have a fixed-rate mortgage, property taxes, homeowners insurance, and property maintenance and repair costs are likely to rise year after year, said Madison, Wisconsin-based Certified Financial. Planner Crystal Cox says.

Tenants can mitigate some of the risk of rent increases by choosing longer leases, Bunio said. So-called “mom-and-pop” landlords may be more open to rent negotiations than larger companies, and being a star tenant also helps, Fernandez notes.

“Landlords like people who maintain their properties, and they like people who make maintenance easy,” says Fernandez.

Another potential concern is potential eviction. Even if you can keep the rent, the landlord may end the lease by selling the building or otherwise.

But homeowners aren’t immune to potential dislocations, notes DeSantis. Many older people have to move to nursing homes because they are no longer safe at home. She encourages people to consider moving to more supportive housing while they still have the health and energy to manage the transition.

“Don’t be forced, make decisions early,” says DeSantis.

Learn more about NerdWallet

Liz Weston, CFP(R) contributor to NerdWallet. Email: Twitter: @lizweston.

– Liz Weston

This content was produced by MarketWatch operated by Dow Jones & Co. MarketWatch is published independently of the Dow Jones Newswires and The Wall Street Journal.


(Closed) Dow Jones Newswire

04-22-23 1637ET

Copyright (c) 2023 Dow Jones & Company, Inc.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *