By John Drachman
Some 110 million Americans will retire in 2021. Will you be one of them?
If you think this is the year to start checking off items on your bucket list, you’ll want to get the answers to a few big questions out of the way first; like “should I think about selling my house and renting a place after I retire?”
For some rental-minded retirees, selling a home during a bull market in real estate may result in a profitable windfall. Such individuals should weigh the pros and cons of renting vs. owning before choosing how to shelter in retirement. While there are real advantages to selling the old homestead and renting, there are some downsides to consider too.
Determine what you’ll need to retire comfortably first and what income you can expect to generate from current assets, including the price of your home. Then, factor in income sources like Social Security and qualified retirement plans. Your financial advisor or financial planner can help you with getting all these figures together. With these numbers in hand, you can begin determining how to support your future retirement lifestyle.
Renting: Goodbye to maintenance and property taxes
Without a house to hold you back, you and yours can explore the world through one short-term lease after another. You’re also free from the burdens of home maintenance.
According to real estate agent, Nile Lundgren “When you rent, you’re not responsible for things. You can be in a community where there is an on-site property manager. So if there’s a leak in the kitchen, it’s just a matter of contacting the manager and then it’s their obligation under the lease terms to rectify any problems.”
Owning: Don’t put your money in someone else’s pocket
As every owner knows, paying off a mortgage is a way to reinvest a major chunk of housing costs into an asset you keep. By not investing in another property, a retiree loses a dependable source of wealth that could come in handy in the event of an emergency. Buying another property comes with its own obligations – and unless the retiree can buy the home outright, they’re signing up for another round of long-term mortgage payments.
“Also, if a retiree doesn’t want to move, or lives in a home that has been in the family for generations and has sentimental value, then selling may not be a desirable option,” added Matthew J. Ure, vice president of Anthony Capital.
Try a Hybrid of Both
Some retirees are choosing to have the “best of both worlds.” They may use some of their housing sale proceeds to pay for travel and short-term leases while investing the rest in a smaller home for retirement. That way they have both a property to come home to as well as cash flow generator from leasing the residence while they’re trotting around the globe.
If you’re ready for your bucket list, take time to consult with an accountant or real estate agent about tomorrow’s living arrangements. They can help run the numbers to determine how best renting vs. owning would fit with your own future retirement lifestyle.
John Drachman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.
