Is It Safe to Rent Your Home During Retirement?

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In retirement, it's a great idea to try to keep your ongoing monthly costs as low as possible. The reason? Once you stop working, you may be limited to not just a fixed income but a lower one than what you earned during your career. So the less you have to spend to live, the better.

To that end, you may think it's best to own a home in retirement -- especially a home that's already paid off. That way, you won't have to worry about rising housing costs the same way renters do.

But actually, even if you've managed to shed your mortgage , there's no guarantee that owning a home in retirement won't cost you more than renting. So you shouldn't assume that renting is a poor financial choice.

The upside of owning a home in retirement

The benefit of owning a home in retirement is that you can't be kicked out unless you fall behind on a mortgage or property tax obligation and face foreclosure. With a rental, your landlord could decide not to renew your lease, leaving you to scramble to find somewhere affordable to live.

Also, if you own a paid-off home, you don't have to worry about a monthly mortgage payment . And even if you still have a mortgage, if it's a fixed one, your monthly payments won't ever change.

Plus, as a homeowner, you may have equity in your property you can tap in a pinch. U.S. homeowners aged 65 and over have a median $250,000 in home equity , according to the National Council on Aging. That's a nice safety net.

The upside of renting a home in retirement

While there are some benefits to owning a home in retirement, don't assume that renting one is a risky financial move. When you rent, you get the benefit of fixed monthly payments for the duration of your lease. And while there's always the chance of your rent increasing or having to move to a more expensive rental if your landlord opts not to renew your lease, it's not as if there aren't surprise expenses with homeownership.

If you own a home, you might have to spend thousands of dollars to replace a heating system or roof. But if your monthly rent is $1,500 and a major appliance breaks, it won't be your financial responsibility to replace it.

And yes, your monthly rent could rise from $1,500 to $1,550 the following year. But that might be an easier expense to cope with than having to find $8,000 overnight for a home repair.

Arm yourself with savings if you'll be renting in retirement

There's nothing wrong with renting your home in retirement. And you may feel more comfortable doing that than facing the financial unknowns of owning a home.

But since you won't have home equity to tap as a renter, make sure to go into retirement with a decent amount of savings in case you end up needing money unexpectedly. That could be to pay for an issue with your car or deal with a health-related matter.

Plus, if you're going to rent, you can't discount the possibility of having to move several times during retirement. And since moving can be expensive, it's important to have savings you can access for that purpose.

But all told, know that renting is retirement is a decision that might work out well for you. So don't assume you're making a mistake, even if most of your fellow retirees opt to become or remain homeowners.

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