Upside of renting
While many long-time homeowners may resist the idea of renting, don’t dismiss it outright. Instead of sinking money into a new house, you may be better off putting it in your investment portfolio. For example, suppose you sell your five-bedroom home and net $300,000 in cash. If you invest that money and earn 6% annually, you’ll generate an extra $18,000 in the first year. Even after taxes, you’ll have a good amount left over to put toward rent, and the cost of homeownership will drop sharply or disappear altogether.
You should also think about how long you expect to stay in your new place. Renting may be the better choice if you’re not sure where you want to settle down for good in retirement. This is especially true if you think you may move within three to five years. (See the 10 Best States for Retirement and The 8 Best Places to Retire for Renters for ideas.) Otherwise, your home might not increase enough in value to offset your initial expenditures on things like real estate commissions and closing costs.