Rent vs Own in Retirement

"Owning your home in retirement" sounds like the goal — but owning has real annual costs (taxes, insurance, maintenance). Renting trades stability for liquidity. See what each scenario costs over a 25-year retirement.

Your scenario

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Roof, HVAC, plumbing — the 1% rule.
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After-tax conservative return — bonds + equity mix.

Own the home outright

Total owning costs over horizon

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Home value at end of horizon

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Net wealth at end

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Sell home, rent, invest proceeds

Total rent over horizon

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Investment balance at end

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Net wealth at end

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The hidden cost of "free" home ownership

People often say "my home is paid off so my housing is free." It's not. Real annual costs typically run 2-4% of home value:

  • Property tax: 0.5-2% depending on state
  • Insurance: 0.3-0.7%
  • Maintenance: 1-2% (roof every 25y, HVAC every 15y, plumbing surprises)
  • HOA, if applicable: variable

On a $500k home, that's $10,000-$20,000/year just to live in a place you "already own." Compare to renting an equivalent unit — often within range.

Why owning still tends to win in retirement

  • Inflation protection. Your property tax may go up, but it's anchored to home value. Rent goes up year after year compounded — over 25 years at 3% inflation, rent doubles.
  • Home appreciation. The equity grows tax-free (mostly — first $250k/$500k of capital gains on primary residence exempt).
  • Stability. Landlords sell, raise rent dramatically, or refuse to renew. Owning eliminates housing risk.
  • Sentimental. Familiar place, accumulated stuff, community ties.

When renting in retirement wins

  • You'd downsize anyway. Selling a $700k home and renting a $2k/mo apartment frees up cash and removes maintenance burden.
  • High-tax / high-cost area. If property taxes are 2%+ of value, ownership is expensive.
  • You want to relocate often. Snowbird, traveling, family in different cities.
  • You need liquidity. Medical costs, helping kids. Equity in a house is illiquid; cash isn't.
  • You'd invest the equity well. A 6% return on $500k = $30k/year, which can cover a lot of rent.