If I choose to never own, will I regret it once I hit retirement?
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Anonymous
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Asking this seriously:
I don't think I want to ever own a home. My family size is ever-changing and we'll finally be empty nesters at 46/48. Right now we rent a home and I like the flexibility. I get nervous when I think about retirement and having to deal with rental payments. Am I shooting myself in the foot by not choosing to own a home to (hopefully) be mortgage free by retirement? |
Anonymous
| Have you done the financial calculations? We are 46/48 now, and own our home free and clear. However, we spend $10,000 a year just on property taxes. |
Anonymous
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A lot of people rent into old age, you just have to budget for the (rising) cost of housing. As PP noted, owning your home doesn't mean your housing costs are zero - you still owe property taxes, insurance and upkeep.
If you rent, you have the flexibility to easily move to smaller or more accessible home/apartment if you want/need to do that. There are a lot of pluses. But you do need to plan for the expense--just as we all do. |
Anonymous
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I know of a family in North Jersey who are in NYC commerical real estate, so he's basically in the biz. He makes a friggin boatload....and rents. He just doesn't want the overhead, i.e. repairs, upkeep.
Works for him, you could make it work for you. |
Anonymous
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It depends. An awful lot of retirees eventually need to move, and that family home can be hard to part with.
But I think the other side is that for most people, a mortgage is a forced savings plan. Often a home is the big asset that they have after retirement. It's not necessarily the smartest investment, but a mortgage payment is something you do month in and month out, for most of your adult life. And you can't do much cheating. Are you putting away a healthy amount? If not, you should think about it. |
Anonymous
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OP here. Thanks for the great feedback. I never even thought about property taxes which, quite frankly, makes the idea of renting while retired seem not as daunting.
And 15:44 raised another great point about possibly not wanting to let go of the home if the need ever came to move for health reasons. Our retirement savings are not where they need to be for sure. My plan for 2013 is to get my financial house in order; just wanted to know if I needed to add: buy a home to this list. This was a good reality check. Thanks. |
Anonymous
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We are in our 40s and rent. I used to own when single. We max out our retirement contributions "and" have real pensions with built in Inflation adjustments. We have no debt. I just don't want to deal with repairs, leaky basements, falling housing prices, possibly bad neighborhood situations, etc. I like the almost-immediate flexibility of moving if I want.
Is this the absolutely wisest thing to do financially? Probably not. But we will be Ok. |
Anonymous
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$ 10K on property taxes is a lot, even in this area. Our house is valued around $600K and our property taxes are about $6K. So, yes we will still have that and assume another $4K for upkeep per year (which may be high, but I like to be conservative on finances).
The cost of renting a similar home would be $3000+/mo. So that's $36K per year. If you had your house paid off for retirement, you'd be saving $26K/year in rent. Let's assume you're paying about $3K/month in rent now -- you're not getting anything in the long term for that. If you bought a house, it's hard to say what your mortgage would be because it depends on what you put down. But, I have to think you are far better off in retirement if you have a house paid off. I think you're making a big mistake. If you can afford it, maybe you should invest in a condo or small house that you can rent out now (while you continue to live in your current rental). Before you retire, you could move into the house you own (and have been renting out) for a year or two and then the increase in equity becomes tax-free as your personal residence (it is no longer taxed as investment income) when you sell and move to your final retirement residence. It's a perfectly legal way to convert investment property gains to tax-free income. |
Anonymous
OP, no offense, but you don't seem to have a clear picture of your financials. You have never even thought about property taxes in this equation? You might be well off getting some professional help in your financial planning. At your age your financial plans ought to be rock solid. You are running out of time for your retirement. |
Anonymous
Why would I think about property taxes unless I actually owned property? While I know folks pay these taxes, it did not initially enter my mind. I'm 32; not really sure how you think I'm running out of time. |
Anonymous
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My retirement plan:
http://online.wsj.com/article/SB10000872396390443720204578004131575356160.html |
Anonymous
OP, I think PP thought you were older because you said this. It never said that you'd be empty nesters SOON, however. |
Anonymous
| You can buy when you become empty nesters and pay off your mortgage in 20 years and still be mortgage free in retirement. |
Anonymous
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NP here - what do you mean that your "family size is always changing?" That has me confused.
NYTimes has a great "is it cheaper to rent or own" calculator that can really help in making sense of the financials. It can take several years of owning before the numbers make sense - if you don't plan to live in the place that long, you'd lose money by buying. If you stay longer, owning can make a lot of sense. |