California residents who are beginning to consider retirement planning may want to consider the issue of renting vs. owning a house during the retirement years. Even though owning a home may be an affordable option, there are considerations that may militate in favor of renting a home in one's non-working years. When engaging in the estate planning and retirement planning process, looking at these issues could be a worthwhile undertaking.
When owning a home, owners are able to have the security of not having to deal with a landlord. They do not have to confront the prospects of a lease ending or being forced out of the property when it is inconvenient to move. In addition, various tax breaks make home ownership enticing. Property taxes, interest on mortgage payments and other benefits are available.
Even though many retirees can afford to own a home in retirement, a substantial number are deciding to forgo home ownership in favor of renting. The main consideration is that owning a home has many requirements for upkeep and maintenance that can be a significant impediment to holding onto cash assets for the extra years of life that most people have these days. Thus, things like rising property taxes and the rising cost of home repairs and maintenance weigh heavily on the decision to rent instead of own.
For a $400,000 property, the average maintenance costs per year are $16,000. For retirees on a tight budget in California, the expenses of house maintenance, along with the added expense of emergency expenditures for a leaking roof or major appliances going bad, can be catastrophic. One fact to consider when engaging in estate planning for retirement issues is that income is generally going to go down in retirement, and planning for the most economical form of housing may be a wise approach. Of course, rental housing can be luxurious and may combine social activities and facilities that will make it fun and less expensive at the same time.
Source: fool.com, "Should You Own a Home in Retirement? Maybe Not", Maurie Backman, Aug. 9, 2017