Today on Retirement Housing Insighters we're going to talk about a topic that's relevant to pretty much anybody entering into retirement.  The housing choices we have in retirement.  For most of us it comes down to three options:

Own a home 

Rent a home

Own or Rent in an Independent Living Facility

We're going to take a look at the pros and cons of each of these options!

Let's start off with owning a home in retirement. My grandmother used to have a saying that once the last picture is hung on the wall it was time to move.  What my grandma was really saying is that there's always something else that needs to be done in a home.  Home ownership is stll an incredibly important concept for many retirees and the vast majority of retirees own a home but today the numbers are a little bit skewed because nearly one out of two people enter into retirement with some sort of mortgage or lien on the house and 1 out of 6 about 15% give or take will carry a mortgage throughout the rest of their lives!

In the past we didn't have that.  People entering retirement had their homes paid off.  Maybe you’ve heard of things like mortgage burning parties where people would burn the mortgage note once the last payment was made.  People would throw a big block party, really.  Now, there are a lot of benefits to owning a house in retirement.  With ownership comes pride and responsibility.  With ownership comes the ability to decide where you want to live and what kind of home you’ll have and what type of community you’ll live in.  With home ownership comes the potential for an increase in equity in your home that allows you to participate in the market and potentially have access to wealth later in retirement,or,  a source of wealth to pass on the beneficiaries or your estate.

The negative of course to owning a home is it can be expensive.  We have taxes, insurance (if you're prudently covering the risk of hazards), maintenance and the miscellaneous repairs that are going to be required throughout the length of retirement.  It’s important to remember for most of us home ownership has always been the American dream and for a lot of us it still is one of the best ways to protect yourself from risks in retirement.  The best way to do this is to have ownership of a residence and coordinate that wealth with the rest of your assets.

Your second option is to rent and there's some really nice things about renting assuming you have a good landlord you probably know them off the top of your head!  You're not responsible for maintenance of the home.  You're not responsible for repairs, taxes or insurance.  Your responsibilities are mainly limited to allowing entry to the home when your landlord requests it and avoiding any damage to the home above wear and tear.  It means that there's a lot less of a burden on you when you rent a home but there are two very serious negatives to renting a home. 

In retirement the first negative is rental costs will continue to rise throughout retirement - what is an affordable home today may not be an affordable home tomorrow especially if we're on a fixed income.  Not only do we have to deal with rising cost rentals we also have the risk that our landlord may sell the home.  We have the potential cost of having to move on a number of occasions over the years and the risk of dealing with bad landlords.  Perhaps most concerning to people familiar with renting besides the above is that we will never participate in the real estate market appreciation.  We will never build wealth in our homes because we won't own a home.  Furthermore if that wasn't enough...oftentimes to rent in a neighborhood we feel safe in and comfortable in may cost a lot more than we anticipate.  If we managed to make it to retirement without a mortgage payment home ownership will likely be substantially less expensive than renting not just at the start a retirement but through retirement.

Option number three is moving into an independent living facility. These facilities are really a lot like condominiums or villas or townhomes within a community.  Within that community you have the potential for additional support and the potential to have resources available to you if you can no longer be independent.  You also have the relationships and interaction that can come with a community.  For many people these are really important benefits that make a big difference in retirement lifestyle.

On the other hand, these independent living facilities can still be quite expensive and may or may not allow for true home ownership.  In some communities you may be purchasing a home in others you may not truly own the property.  Although there are a number of benefits to being in a community, we can find many of those same benefits by owning a home or renting a home.  For example, having a common ‘club house’ or recreation center is not exclusiveto independent living facilities. The top thing to keep in mind, however, is 9 out of 10 people want to remain in their home in retirement.  Since the majority of US retirees own a home entering into retirement and our preferred choice is to stay in our home thenretirement independent living facilities aren't necessarily a realistic option for a lot of us.  After all, retirement is not just about our needs it's also about our wants and we need to take into consideration what we really want.  To a lot of people the biggest benefit of an independent living facility is,especially if they don't have family or friends to help assist, that if and when we shift from an independent lifestyle to an assisted lifestyle as we age, it can be fairly seamless.  So, if need be, I may have the resources available to start nursing care or companionship care in my home as part of that facility.  This would of course add an extra cost no different than if I had companionship care or nursing care at a home I own or rent.

When it comes to housing in retirement and we look at our three choices the most important thing to think about is what do you really want?  What do you feel like you can afford?  What type of community would you like to live in?  There are no right or wrong answers when choosing housing options in retirement, instead,  it's about making sure that you can enjoy your retirement safely and securely.

Josh Blum

Retirement Housing Insighters