So, all of your children have (hopefully) left the nest and your 5-bedroom, 4-bathroom home just isn’t necessary anymore. Besides that, it’s a huge drain on your retirement accounts, so downsizing is definitely and excellent idea.
Now the only question is whether to buy another home or rent either a home or an apartment.
It’s not easy or quick decision, by any means. You have to estimate the cash flows needs you’re going to have in retirement, compare the relative cost of home ownership to renting and keep in mind that home maintenance and property taxes, as well as annual rent hikes, are all costs that could change and cause financial stress.
Some of the decision-making will likely be impacted by your emotions as well, including whether you like to work in your own garden and fix up your own home or whether you’re sick of doing both and look forward to not having to worry about those tasks.
Renting is certainly a better option than buying if you aren’t sure how long you will be staying in the same place. For example, if you have any type of plans to move within the next 3 to 5 years, renting is probably a better option. Also, if you haven’t lived in a specific area or state before, renting is again probably a better idea than buying so that you can make sure you actually like living there. If you don’t, and decide to move, you might end up losing a lot of money in real estate and closing costs.
Another thing to keep in mind is that, if you sell your old home, you can take that money and put it into an investment that will likely make more money for you then the difference you pay in rent, as opposed to sinking that money into another home.
For example, the average yearly appreciation on homes since 1968 is approximately 5.4%, while during the same time the annualized return on the Standard & Poor’s 500-stock index was approximately 10%. That’s a 4.6% difference that, even after a few years, could made quite a bit of difference in how much money you have in your retirement accounts.
One other factor that you might want to keep in mind is this; living in an apartment community gives you the opportunity to meet a lot more people and socialize a lot more as well. Depending on how much your family comes to visit (or doesn’t) this might be an important factor for you
Speak Your Mind