In response to my recent real estate articles, an AC reader sent me a message to ask about the benefits and drawbacks to buying a home after retirement. Senior citizens are in a unique position once they’ve retired from their jobs, and arguably have more freedom than those of us still tied to the world of employment. So should senior citizens buy or rent a home after retirement?
The answer to this question lies largely in the examination of three different factors: age, lifestyle, and financial situation.
You Aren’t Over the Hill Yet
When senior citizens must decide if they should buy or rent a home after retirement, it’s important to consider age and health before moving forward. There are plenty of octogenarian senior citizens who run three miles in the morning and experience very few health problems; age doesn’t necessarily draw the line between renting and buying. However, if you consider your health, the line becomes a little less blurry.
When you rent a home or apartment, you don’t have to worry about conducting routine maintenance yourself, and your landlord is responsible for taking care of problems. In apartments and condominiums, the yard care is usually included in the rent, which means that you don’t have to worry about that either. Renting is often easier on senior citizens who are in poor health because it reduces stress and increases security in the home.
Of course, if you choose to buy a home after retirement, you’ll have the equity you build with your mortgage payments (or if you purchase the house outright), and you can hire people to take care of maintenance and repairs. It all depends on your financial status and your ability to meet financial obligations.
Life on a Fixed Income
Most senior citizens are living on a fixed income from social security, 401(k)s and other retirement benefits. When you have a fixed income, budgeting your money can become difficult, and a mortgage might be out of the question. When you rent, you can move to compensate for added expenses and to lower your monthly payments. A mortgage binds you to a specific amount each month unless you intend to sell.
Of course, some senior citizens have sufficient financial resources to purchase a home outright, which negates the need for monthly mortgage payments entirely. It also gives them a source of additional funding should their expenses increase in the future; many senior citizens choose to refinance their homes to free up available cash.
As far as finances are concerned, senior citizens are often better off renting rather than buying a home, but this is something you’ll need to contemplate at length. Sudden medical expenses can destroy a fixed-income budget, leaving you without many options.
The World is Your Oyster
Another factor to consider is your current lifestyle, and the lifestyle you intend to lead in the future. When deciding whether to rent or buy your home, it’s important to remember that the sky is the limit. You might want to travel after retirement, seeing the world on your retirement funds, and a mortgage would only serve to strap you to a particular place. You don’t want to spend six months in Europe while paying the mortgage on your new home.
It is also important to remember that senior citizens can easily experience health problems. You might buy a beautiful two-story home, then experience health problems that make stairs out of the question. Then you’re stuck in a home with a mortgage and the inability to use the second floor.
Putting it All Together
In the end, whether you choose to rent your home or buy one, stability and security are the most important things. You’ve worked hard to build a nest egg for yourself, and you deserve the ability to relax and enjoy yourself.
