Renting vs Owning a Home is a Lifestyle Choice
- There’s an increasing trend among seniors to rent, versus own, their homes.
- There are several compelling reasons for this trend.
- It may make sense, both in terms of lifestyle and finances, to rent your home in retirement.
Typically, when one hears the words “the American dream,” one of the images it conjures is of owning a home, maybe with a white picket fence on a tree-lined street. Conversely, the idea of renting a home may not fit in with that dream, especially if you’re used to owning in the past. But sometimes it makes sense to rent, depending on your circumstances.
John Burns Real Estate Consulting conducted a recent survey on rental trends and found that there’s currently a rise in renting by seniors. For context, if you look back at the 1980s, the historical average for seniors renting their homes was around 20%. This dipped to around 18-19% in 2005, but it’s currently at 24% and rising.
There are a number of reasons for this trend. First, the divorce rate for seniors is rising, which means both parties have less money to spend on housing. Owning a home may no longer be an option and renting is less expensive.
Second, retirees may find themselves needing the cash. As baby boomers move into retirement, many of them are finding that, unlike their parents, they don’t have the savings retirement requires. Selling a home and renting something smaller can free up much-needed cash.
Third, as of January 2018, the tax code has changed, getting rid of some of the tax deduction for real estate, making a much higher standard deduction. This may have affected taxes enough for some seniors to decide that renting is the better option.
Fourth, there are those retirees who decide they want to move out of the suburbs and live in an urban setting. Generally, this comes with a higher housing price tag, making owning out of reach…but renting a reasonable possibility.
The final reason for this trend is that many seniors decide they want to move to where their children are, and for many this may be to a metro area where, again, housing is more expensive.
Neither renting nor owning is the “right” thing to do—it’s very much a lifestyle choice, and sometimes it’s a budget choice. Everyone has their own set of circumstances and this requires looking at the numbers to decide what makes the most sense for you. Perhaps you’ll find that you can live really well if you rent, saving money on property taxes, home improvement expenses, and maintenance costs.
There’s a reason it’s becoming increasingly popular to rent, and it shouldn’t be something older Americans reject out of hand. Maybe it’s right for you. If it makes sense, it makes sense. Until next time, enjoy.
Gary Klaben is in our Glenview, IL office and serves our clients who are now located all over the country. He has over 30 years of experience and is the author of Changing the Conversation, Wealth of Everything and co-author of The Business Battlefield. Whether advising his clients, mentoring his team, or coaching entrepreneurs, he is always simplifying complexity and motivating others to take the next action that’s right for them.
Learn more about TransformingWealth™ , our proprietary approach designed to get your arms around the big picture, so you can make informed financial decisions. Ask Gary about Coyle’s TransformingWealth Preview Meeting and schedule a complimentary consultation and start living the Good Life Managed Well™.
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