Is It Better to Rent During Retirement or Own?

Here's how to figure out the best housing situation for your senior years.

Many people have the goal of buying a home and paying it off in time for retirement. That way, they get to enjoy the benefits of property ownership without having a mortgage payment to cover every month.

But owning a home isn't the only route to take in retirement. In fact, there are benefits and drawbacks to both renting and owning. The question is -- which is the right choice for you?

The pros and cons of owning

Owning a home as a retiree could give you more financial freedom. Even if your home isn't fully paid off, if you have enough equity in it, you can borrow against it as needed. Plus, if you own a home and your zoning laws allow for it, you'll have the option to rent out portions of your property to boost your retirement income.

Owning can also give you more stability during retirement. You won't have to worry about your rent going up or your landlord deciding not to renew your lease.

On the other hand, when you own a home, it's not just your mortgage you have to worry about. You also have to contend with property taxes, homeowners insurance, maintenance, and repairs. Those costs -- especially repairs -- can be unpredictable, and that could cause you financial stress at a time when you're no longer bringing home a paycheck from a job.

What's more, owning a home doesn't always give you full freedom. You may not have the option to rent out part of your property if your town prohibits it or you're part of a homeowners association that doesn't allow it.

The pros and cons of renting

The upside of renting a home as a retiree is that your housing costs will be fixed for as long as your lease is in place. If you manage to sign a longer-term lease, you could lock in an affordable home for several years, during which time you won't have to worry about property tax hikes or costly repairs eating up lots of your income.

Also, when you rent, your landlord has to cover maintenance and repairs. Doing those tasks yourself could take more of a toll on your body as you age. Having that work be somebody else's problem is a good thing.

That said, when you rent a home in retirement, you're not guaranteed to be able to stay. Your landlord could opt to not renew your lease after a few years, leaving you to scramble to find a new place to live. Not only might that disrupt your lifestyle, but it could force you to repeatedly bear the cost of having to move.

Plus, when you rent a home, it can't serve as a cash source. If you're in a pinch where you need funds, you won't have the option to take out a home equity loan or line of credit like a homeowner would.

What's the right decision for you?

When it comes to owning vs. renting in retirement, there's no right or wrong answer. Your best bet may be to weigh the pros and cons to see which scenario you're more comfortable with. Remember, if you decide to hang on to your home in retirement or buy a new one but find that owning becomes financially stressful, you could always put your property on the market and start renting instead.

Either way, before you make your decision, compare your choices for owning a home vs. renting one. It may be that there are no rentals in your area that offer the amenities you want, in which case owning might make more sense. The more research you do, the better equipped you'll be to make the right call.