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7 Reasons You Should Consider Renting in Retirement

Teresa Mears

For years, the standard plan for retirement was to pay off your mortgage and continue living in your family home, or perhaps sell that home and pay cash for a smaller home, possibly in a retirement community.

But that plan has changed in recent years, as some retirees have joined their millennial children and grandchildren in choosing to rent rather than buy. While their reasons vary, the trend indicates that renting is losing its stigma and that, for some older people, renting makes good economic sense.

"Before, there was always a stigma in renting," says Mari Adam, a financial planner in Boca Raton, Florida. "That's really changed."

Before you decide that renting is a better option, get some real information about what your budget will cover, suggests Walter Updegrave, author, journalist and publisher of the website Real Deal Retirement.

"The question comes down to how strong is the rental market in your area," Updegrave says. "In a lot of cities, rents have been going up quite a bit. ... What would you really have to pay for something acceptable or comparable to what you live in?" Plus, he says, you are going to have to plan for the possibility that your rent will rise every year.

That makes it important to examine rental options in the area where you want to live before you decide to forgo homeownership, so you'll know what compromises you may have to make to find an affordable rental. "It's a very complicated decision, and it's very emotional," says Liz Weston, a personal finance columnist and author. "There are a lot of places where it's cheaper to own if you're just looking at the mortgage payment."

Here are seven reasons to rent in retirement.

You want to try out a new area. Many people fantasize about moving to Florida or Arizona or even another country when they retire. But those places are big lifestyle changes for many, and some people discover that the land of mosquitoes and endless summer is not for them. Plus, it's hard to choose a neighborhood when you don't know the city. Renting gives you an opportunity to try on a new lifestyle and check out neighborhoods without committing. "If you're relocating ... I think it's a good idea to test the waters by renting," Updegrave says. "You may want to rent for a year to get a sense of whether you like the area as well as the specific neighborhood you're in."

You expect to move soon. If you sell the family house and expect to need assisted living within a few years, buying a home to live in for a short time may not make sense. Or perhaps you're planning to move closer to children in a few years, but you want to stay in your hometown a little longer. Renting makes it easier to move quickly. "It's hard ... to really look ahead and know when are those transition points," Adam says.

You can't afford to own a home. The cost of the mortgage is just part of the cost of homeownership. Real estate taxes, condo or HOA fees and homeowners insurance are somewhat predictable, but the cost of repairs is a looming unknown. A new roof on your Florida house could cost $25,000. The furnace could go out in your New York home, requiring you to spend $6,000 to replace it. Your condo complex could assess you $10,000 for the building's new windows and elevators. Those types of expenses require you to keep some cash in reserve. "Houses are so expensive, and the expenses are unpredictable sometimes," Weston says.

You want more freedom. You don't want to spend the rest of your life in one place, and you want to be free for adventure. That might mean long-term travel, living a few years near one child and then a few years near another, or maybe you would like to test out various cities where you could settle. In any of these scenarios, renting makes more sense. "When you're renting, it gives you a lot of flexibility," Adam says.

You want to tap the equity in your home. If your home is worth a lot of money but you have no access to cash for living expenses, selling the home and renting can be a good option for some, though you'll need to do the math and weigh this option versus a reverse mortgage. "You can't eat the equity in your home," Adam says. "To have equity in your home does you no good."

You want to move into senior housing. Some older people, especially if they are single, may not like living alone but they may not need assisted living. One option is to rent an apartment in an independent living community, which provides meals, activities and maintenance. Buy-in communities also have these amenities, but a rental community is less of a commitment and may make more financial sense for some.

You can't get a mortgage. Since the foreclosure crisis, lenders have become much stricter about documenting income. Retirement income counts, but you may not have enough money for the home you want, especially if you don't have a lot of cash for a down payment. "Buying becomes more difficult when you retire because lending standards are stricter," Adam says. "It's harder than it used to be."



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