Before You Retire: Should You Save or Buy a House?

If you’re getting close to retirement , figuring out your living situation can be a big decision. Should you buy a house before retiring? Or should you continue saving with the intention of renting after you retire?

On one hand, owning a home can offer predictable payments and the potential to build home equity. On the other, renting can provide flexibility and fewer financial responsibilities.

Here are some of the benefits and drawbacks of each option to help you decide which one best aligns with your retirement goals.

Also here are some alternatives to buying a house in your retirement.

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Buying Now vs. Renting Later

“On the positive side, owning a home can provide stability in retirement by eliminating monthly mortgage payments once the loan is paid off,” said Adam Chahl, real estate agent and founder of Vancouver Home Search . “Additionally, property ownership can potentially appreciate over time, acting as a form of investment.

“However, there are upfront costs such as down payments, closing costs and ongoing expenses like property taxes, maintenance and insurance. Market fluctuations can also impact the value of the property, affecting financial liquidity and retirement savings. Therefore, while homeownership can offer long-term financial benefits, retirees should carefully evaluate these factors against their financial situation and retirement goals.”

Renting may be an advantage if you want to have the option to pick up and move without too much hassle, prefer to avoid tying up savings in real estate or face uncertain housing market conditions, Chahl said.

“It allows flexibility without the commitment to property maintenance and the financial obligations of homeownership,” he explained.

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Other Factors To Consider When Deciding

When deciding between saving and buying a home before retirement, Chahl said that retirees should consider several key factors.

“Location plays a crucial role in both property values and lifestyle preferences,” he said. “Current housing market conditions and trends can impact the affordability and potential appreciation of real estate investments. Additionally, retirees should assess their anticipated retirement income, health considerations and overall financial goals. The decision should align with their ability to manage homeownership responsibilities and the desire for financial stability and long-term security in retirement.”

Chahl also said that housing market trends can have a big impact on the decision-making process for retirees regarding renting or buying a home.

“Favorable market conditions, such as low mortgage rates and steady property appreciation, may make homeownership a beneficial investment,” he explained.

“Conversely, a volatile market with unpredictable price fluctuations might make renting a more prudent choice to avoid potential financial risks associated with homeownership,” Chahl said. “Retirees should stay informed about market trends and consult with financial advisors and real estate professionals to make well-informed decisions that align with their retirement goals and financial stability.”

Bottom Line: Should You Buy a Home or Plan To Rent?

David Wiedmeyer, financial planner and owner of KLD Wealth Management , said it’s important for retirees to consider their retirement income when deciding between saving and buying a home.

“No housing is zero cost and you cannot spend home equity without selling or taking on debt,” he said. “Owning a home has constant costs, including property taxes and upkeep. The only risk for renting is rising rent and is much more controllable via lifestyle choices.”

Wiedmeyer pointed out that another factor when considering owning or renting in retirement is the opportunity cost between the interest, down payment and other closing costs when purchasing a home.

“The opportunity cost could be hundreds of thousands of dollars,” he said. “This could be the difference between a successful retirement and a retiree spending their days as a door greeter.”

The bottom line, according to Wiedmeyer, is that if a retiree does not have a clear plan on how to generate the money needed to sustain retirement, then their focus should be on saving and investing.

“At the end of the day, rent is the maximum a retiree will pay while a mortgage payment is the minimum,” he said. “A proper plan can give a clear picture on which is sustainable and align with the goals of the retiree. The purchase of a home is typically an emotional decision. The key is to do the math.”

This article originally appeared on GOBankingRates.com : Before You Retire: Should You Save or Buy a House?