Buzz
Owning a home is often celebrated as a cornerstone of financial security, which makes it concerning that it seems increasingly unattainable for younger generations. In contrast, older individuals typically enter retirement as homeowners—80% of those aged 60 and above own property (though approximately 40% still have a mortgage and haven’t fully paid off their homes).
Home equity can be a significant asset during retirement, but homeownership also has its drawbacks. Even without a mortgage, there are ongoing expenses, extensive upkeep, and limited flexibility to adapt to lifestyle changes. Selling your home to access its equity could provide additional funds for retirement, and renting offers greater freedom. Maintenance issues? They become someone else’s responsibility. Want to relocate or try a new area? Renting makes it simple to move.
While there are a few valid reasons to sell your house and rent in retirement, it remains a less-than-ideal choice.
Financial drawbacks of selling and renting
Choosing to sell your home and rent instead can lead to numerous financial disadvantages:
Capital gains. Depending on your home sale profits, you could face significant capital gains taxes. While you can exclude up to $250,000 (single) or $500,000 (married), any amount beyond that is taxable. If your home’s value has soared since you bought it years ago, the taxes might reduce your expected earnings.
Loss of equity. Selling your home means losing access to that equity. Equity is incredibly valuable, allowing you to borrow funds when needed. Renting, on the other hand, means your money isn’t invested in an appreciating asset. Home values typically rise over time (averaging 4.3% since 1991 and 7.7% since 2012), while rent only covers temporary shelter.
Costs. Even without a mortgage, homeownership comes with expenses—though usually less than renting. Average homeowners insurance is around $2,230 yearly, property taxes average $1,682, and maintenance can cost approximately $6,000 annually, totaling nearly $10,000 per year (costs vary). In contrast, average rent is $16,464 yearly. While renting might be cheaper in some regions (e.g., North Dakota at $10,560 annually), selling your home often leads to higher housing costs.
Renting provides flexibility—but also instability
Despite the financial risks of selling and renting, some people are drawn to the flexibility it offers. Renting makes it easy to relocate, switch homes, or downsize if your financial situation changes.
However, this freedom often sacrifices stability:
You’ll need to interact with a landlord, who will exert some level of control over your living situation.
Rent hikes can occur—sometimes significantly. For instance, in Columbia, South Carolina, rents have surged over 40% since the pre-pandemic era, while New York City has seen nearly a 20% increase. With little control over market rental rates, you must be ready for frequent rent increases or the need to relocate.
While it’s convenient to have someone else handle maintenance and repairs, this depends on their responsiveness. If your landlord or property management is neglectful, resolving issues can become a lengthy struggle—something you could easily manage as a homeowner.
Inheritance considerations
Another critical factor when cashing out your equity is your family’s inheritance. A home is typically an appreciating asset, so passing it on to your heirs gives them the option to live in it or sell it for a financial gain. By cashing out, you risk spending that equity on housing and leaving little to no inheritance for your children or other beneficiaries.
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