Home Ownership During Retirement

Many pre-retirees have the same question crop up, and there never seems to be a solid definitive answer based on a quick Google search: Should I own my home throughout retirement?

Home ownership is a complicated part of our financial lives. There’s a sense of pride in owning a home, but a hefty mortgage and costly maintenance can cripple your cash flow as a retiree. So - should you own your home during retirement? And if you choose to own instead of renting, what’s the best way to mitigate the risks of home ownership as a retiree?

Rent Or Own?

Let’s tackle the biggest question first: should you rent or own your home during retirement? The truth is, there isn’t a right answer here. Owning a home can be a positive emotional part of your finances, and the tasks that come with home ownership can be fulfilling as a retiree. Waking up to refinish a room, or perform maintenance on the home you own, can give your days a sense of structure and purpose.

However, for some retirees, renting makes more sense. There’s less liability when you rent, and it can also facilitate a more easy-going, travel-friendly lifestyle. Without the responsibility of home ownership, you’re free to travel as you please, come and go to visit with family and fill your time with hobbies or an encore career instead of home maintenance. Renting have have its own limitations, but ultimately, deciding whether to rent or own is really a question of your retirement lifestyle: what are you looking to get out of your days as a retiree?

Paying Down Your Mortgage

If you choose to continue to own your home during retirement, one option to consider is paying down your mortgage before you retire. In some cases, this might mean delaying retirement by a few years while you focus on debt repayment. Although mortgages are often viewed as “good” debt, the truth is hard to swallow: there is no good debt. Carrying debt into retirement is a lifestyle choice; it may be more prudent to have no significant debt at this point in your life.  And current tax laws do not necessarily favor the mortgage interest deduction as in the past.

You’ve spent a lot of years building a retirement nest egg - do you want to spend it all on a mortgage or to pay down other debt? It should be used to pay for your lifestyle and to ensure you have the funds necessary to pay for unexpected medical expenses, or potential long-term care as necessary. More importantly, your wealth should be used to build the legacy you’ve always dreamed about leaving behind.

Consider Downsizing

A happy balance to strike between owning and renting is to downsize your home. Let’s be honest - nobody dreams of filling their days as a retiree cleaning a house that’s too big for themselves and their partner. No one wants to fix the guest bathroom sink for the 9th time even when nobody is using it. Downsizing your home can successfully help you accomplish two things:

  1. It can free you up to do less homeowner maintenance and tasks so that you can spend more time doing the things you love.
  2. It can help you to pay off your home in full more quickly to live debt-free during retirement.

Downsizing can be a stressful thought, but we challenge you to look at it as a freeing concept. Moving into a smaller place may evoke various emotions; look at it as a way to free up a significant portion of cash flow during retirement to spend in any way you choose. For many of our clients, downsizing has been an exciting adventure that helps to facilitate the retirement lifestyle they’ve dreamed of and planned for. Want to learn more? Schedule a consultation with us today!

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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