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Many people find comfort in picturing their retirement life unfolding in the home they’ve owned for decades. Or they enjoy the exciting prospect of a newly purchased house chosen to fit their changing lifestyle.

But renting – something most soon-to-be retirees may think they’ve put far behind them – can offer financial and lifestyle freedoms that elude retired homeowners and make the option well worth exploring.

Cost Calculations

Homeownership is a good thing – but as needs and priorities change in retirement, you may find fiscal advantages in renting. For example, if you own your home as you head into retirement, selling it can provide additional income that expands your options for finding new housing, travel or whatever is most important to you in the next chapter of your life.

How long you’ve lived in your home, how much equity you’ve built up, and whether you’ve paid off your mortgage are among the key factors in weighing a sale. Even if your home is completely paid for, you’ll still need to budget for home maintenance expenses – 2% of your home’s value is a good annual estimate – as well as yearly property taxes.

When you’re exploring selling, it’s worth noting that if you’ve lived in your house at least two of the past five years, the first $250,000 in capital gains is tax-free – and that exclusion is $500,000 for married couples who file a joint tax return. Going this route also means doing your homework on how to maximize your home’s appeal to buyers and to gauge the overall economy’s impact on the home market.

Other factors that can make the cost of renting a home lower than owning include renters insurance premiums – usually well below the price of homeowners insurance – and utilities that may be included in renting, such as garbage removal.

Freedom and Flexibility

Renting also offers some freedom and flexibility that appeal to soon-to-be or newly retired people, in large part because of what renting doesn’t involve. Household maintenance chores and basic outside duties like cleaning the gutters, mowing the lawn, raking leaves or repainting the garage trim can become more difficult as we get older. But they’re generally not the responsibility of renters – which can remove stress and leave you more time to do what you want.

Other reasons for renting include a desire to move out of “too much house,” or to find a single-story place that will be easier to navigate in the long term.

Downsizing your lifestyle to rent can also open up new opportunities in retirement: If you’ve always wanted to live lakeside, or in the mountains, or maybe on the beach, renting may be a good option to try out your dream location without overcommitting either money or time.

You may not even know yet where you want to spend your retirement, and that’s OK! After all, when you don’t have a house to sell, it’s that much easier to look ahead to the end of a rental agreement and plan for another move, whether it’s to be closer to family, or someplace warmer or even abroad.

Travel is also a popular item on the retirement to-do list, and whether you have family all over the country or just a hundred places you’re aching to see, renting can offer you the freedom to just go and know that things at home will be handled while you’re gone.

Many rental properties are also part of active retirement communities, which offer amenities and a sense of belonging and connection among retirees in the same stage of life who share similar interests.

There are clear advantages to renting in retirement, and your lifestyle choices and how you want to spend your time should play as prominent a role as financial considerations when you’re exploring whether it’s right for you. Get in touch with a financial advisor to talk over your retirement plans. Together you can look at whether renting might be the best path toward your goals. Call us at 1-800-KEY2YOU® to get started. For clients using a TDD/TTY device, please call 1-800-539-8336.

This information and recommendations contained herein are compiled from sources deemed reliable, but are not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or are offering any tax, accounting, or legal advice.

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