What is better at retirement: Owning or Renting?

Retirement does not mean only a change in routine, there are several other responsibilities that change with time. Most people think of selling their home but the next more challenging question is whether to buy or rent? Again this is to do with the how much can you afford once you retire.

The biggest difference is in the level of responsibility and freedom. You're obviously freer when renting since you can leave when your lease is up, and you have less responsibility because the owner takes care of the maintenance work. But renters can also have less control than owners over things like decorating, repairs and renovations and even pets, and when you've been a homeowner for a long time, that’s not always an easy thing to handle.

Buying a house or condominium can also appear financially attractive because it's an asset that has historically increased in value over time. But keep in mind that real estate values do sometimes drop, and as a retiree you won’t have a lot of time to make up for a decline in value. And something else to remember: When you buy a new place instead of investing the proceeds from your house sale and renting an apartment, that money is tied up and not easily accessible should you need it.

Own or Invest?

Usually, people who are nearing retirement and selling their houses have already paid off the mortgage. Some retired people prefer the renting option as they won’t have to pay property taxes, but your landlord’s property tax expenses are built into your rent, and your annual outlay for rent is likely to be far greater than your former property tax bill. While you can cover your rent with the proceeds from the sale of your house, you can expect your rent to increase over time, taking an ever-greater bite out of your savings.

So, once again, buying or renting depends on what your objectives are. For example, investing a portion of the money from the sale of your house may be a serious consideration for you, especially if you're counting on it to be a substantial part of your retirement nest egg. The question is: Which is a safer investment, real estate or stocks? In this era of volatile stock markets and inflated real estate prices, there isn’t an easy answer, and the wrong decision can come back to haunt you. As well as a wise investment can be the best asset for your entire life. The best path for all retired is to downgrade if they cannot afford their existing housing  option; sell your house and buy a cheaper one. That way, you're still a property owner but you also have money that you can invest. And there’s the added benefit of not having to pay capital gains tax on the proceeds of your home sale, if it was your principle residence.

What about a Condo?

Many retired buyers are attracted to condos, some people feel it's financially beneficial to invest the proceeds from a house sale in a condo, but they sometimes forget they'll need to pay condo fees, which can be hundreds of dollars per month. These fees depend on the size of your unit and the amenities in your building, among other factors. Once again, for many it's a matter of lifestyle. According to the Canada Mortgage and Housing Corporation’s Condominium Buyer’s Guide, condo rules typically cover such areas as the maximum number of occupants per unit, whether you can have pets, noise, parking, hours of use for amenities such as pools and exercise rooms, and the appearance and alteration of your unit.

Among all the variables around renting or buying in retirement, one thing is certain: One size most definitely does not fit all. So assess your personal financial situation and find the solution that best suits your needs.

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