5 Ways Renting When You Retire Can Save You Money

If you’ve been dreaming about retirement since the day you started working, you have likely figured out that your income may look significantly different in your golden years.

If your income will be reduced substantially, you may want to make moves to help you live comfortably within your means. For instance, you may downsize your home or even relocate to a more affordable area.

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In some cases, you may even want to consider renting an apartment or home instead of owning one. Whether you can sell your house for a sizable profit or do not want the added costs of purchasing a property, renting may be the best option for you throughout retirement. As with any move, it is strongly recommended that you speak with a financial advisor or professional about your retirement.

Until you are ready to quit your morning commute, here are five ways you can save money when renting while you’re retired .

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Affordability

The primary reason a person may want to rent during retirement is that it can be more cost-effective. A recent study on Realtor.com found that it is now cheaper to rent a home than to buy one in the 50 largest metro areas in the United States. In fact, purchasing a starter home will cost you approximately 60% more than renting one.

Thomas Kopelman, a financial planner and co-founder at AllStreet Wealth , said there are plenty of times when it makes sense for a person to rent during retirement. He explained, “The goal for many is to have a paid-off mortgage in retirement to keep fixed spending low, but it really all is an affordability game.”

“If you can afford to rent, it actually can be a great move, so you don’t have to fix things, plan for unexpected expenses, mow your lawn, etc. This can be a really huge benefit and give peace of mind,” he added. “Also, many can sell their house and then use those funds to fund rent for a long time and any other expenses they may have.”

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Flexibility

Christopher Stroup, a financial advisor with Abacus Wealth Partners , said renting also provides retirees with a certain degree of flexibility. He noted, “Homeownership can offer retirees stability while renting can provide greater flexibility. Renting during retirement can be advantageous due to the numerous financial risks of owning a home.”

“For example, fluctuations in market values, unforeseen maintenance costs, and the rising costs of premiums and deductibles can substantially outpace the increase in rental costs during your lifetime,” he added.

Maintenance Costs

As Mr. Stroup said, there are financial risks with owning a home, including unforeseen maintenance costs. Budgeting for upkeep becomes imperative if you decide to continue owning when you retire. It’s important to know the lifespan of things like your roof and your water heater to factor in those costs.

As reported by State Farm , it is recommended that you set aside between 1% – 4% of your home’s value for maintenance costs. Renting, however, would eliminate those added costs.

Other Housing Expenses

In addition to maintenance costs, owning a home may come with additional financial costs that can break the bank when you retire. Depending on where you live, the costs of owning a home can be extraordinary.

Stroup noted, “For those retirees living in environmentally disaster-prone regions of the country (e.g., hurricanes in Florida), this calculus is even more important. Whichever way you go, recognize that housing expenses will be a large part of your budget in retirement. It’s important to understand the financial costs and emotional tradeoffs with each option so that you can make the best financial decision for your situation and goals.”

Liquidity

Finally, there are several benefits to renting during retirement.

Selling your home and renting can provide a substantial amount of money throughout your retirement. Stroup explained, “The pros to renting during retirement include liquidity, minimal to no maintenance expense responsibilities, flexibility in moving, and fewer costs and taxes.”

He continued, “If you find yourself valuing these rental benefits more than the benefits of homeownership like building equity, stability, and potential tax deductions, then renting during retirement might be the better financial decision for your situation.”

This article originally appeared on GOBankingRates.com : 5 Ways Renting When You Retire Can Save You Money