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How to decide whether to rent or own in retirement

The right choice is different for everyone, and will depend on your personal goals and cash flow needs, experts say.

Crunch the numbers to decide whether it's better

Crunch the numbers to decide whether it's better to rent or own in retirement, experts say. Photo Credit: Getty Images / BakiBG

Retirement is full of dilemmas. Few are greater than deciding where to live. Should you stay in your current home or downsize? If so, should you buy a smaller home or rent?

“The decision to rent or own in retirement comes down to where you live now, your finances and, ultimately, your goals in retirement,” says Allen Shayanfekr, CEO and co-founder of Sharestates, a Great Neck investment company.

Key considerations: “One of the biggest advantages of homeownership, even more valuable in retirement while living on a fixed income, is that mortgage interest and property taxes remain one of the last major federal tax deductions available,” says Gary Rudow, managing director/investments at investment firm Stifel, in Manhattan. “If the home is owned outright, monthly expenses can be greatly reduced.” But remember that the tax overhaul caps deductions for state income and local property taxes at $10,000.

Some people want to stay in their home, and of much importance, to leave it to heirs.

Assess your cash flow needs: “Renting can save you capital and lower your expenses. If a retiree were to sell their prior home and net $300,000 after the sale, they can invest that money at 6 percent. That’s $18,000 a year in earnings that they can use to pay their rent and keep their capital. Calculate the numbers and see what makes most sense for you,” says Frank Sanchez, principal and co-founder of SDF Capital in Mamaroneck.

But renting isn’t perfect. “Retirees are subject to rent increases, often from year to year. That could cut into their retirement income more than they might expect,” says Rudow.

Get help: Consult your financial adviser. Says Jeffrey Feinstein, a vice president with Lenox Advisors in Manhattan, “The sweet spot is different for everyone.”

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