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Retired couple with nearly $1M in savings asks Suze Orman if they should buy or rent their retirement home

Maurie Backman
·5-min read

There’s an age-old question many retirees eventually ask themselves: is it better to own a home and deal with the possible surprise costs that can come with homeownership, or rent a senior community condo knowing that monthly costs are fixed (at least for the duration of your lease)?

It’s one thing to want the stability of homeownership when you’re holding down careers and have kids in a school district. But once you’ve left the workforce and your kids have flown the coop, you might be less inclined to upkeep a home.

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During an episode of Suze Orman’s Women & Money podcast, retiree Jean wrote to the finance personality to ask what her thoughts were on owning a home versus renting.

Jean said her husband prefers to move to a “friendlier senior state” and buy a home, while she prefers downsizing to a “luxury senior community apartment.”

Here’s the advice Orman doled out to Jean and her husband.

Jean, who said she and her husband are in their 70s, told Orman that they’re divided on homeownership and can’t come to an agreement.

The couple has around $1 million in savings — $850,000 in an IRA, Roth IRA and annuities, plus an additional $100,000 in savings — and are looking at selling their current home for somewhere between $450,000 to $500,000, with no capital gains tax to worry about.

That’s all on top of a generous monthly Social Security​ and pension income which, for the husband alone, is $9,000 per month.

However, Jean believes that her husband won’t be able to keep up with regular maintenance if they bought another home — from mowing the lawn to minor repairs — especially as he gets older. She also added that she has no interest in purchasing a traditional condo given the skyrocketing HOA fees and possible assessments.

Instead, Jean prefers to use the money from the sale of their home to travel, while also enjoying a more lowkey lifestyle in a senior community where they can relax and socialize.

Read more: ‘You didn’t want to risk it’: 80-year-old woman from South Carolina is looking for the safest place for her family’s $250,000 savings. Dave Ramsey responds

Orman admitted that "there isn't a right or wrong answer," adding that it wasn’t solely a “financial decision."

The couple clearly has the money for either option. Rather, Orman pointed out, it’s a matter of which choice makes for a less stressful lifestyle in retirement.

In Orman’s opinion, renting a luxury senior community apartment is the better option. Owning a home takes work, and it’ll only get harder with age. So, rather than stressing over property landscaping, broken furnaces or a leaky roof, it may be a more worthwhile investment to kick back in a seniors community.

In addition, Orman pointed out that many senior communities are reluctant to bring in people with major health issues, so getting in while you’re still in peak health is essential.

“Listen to your wife here because, in the long run, you’re going to be so happy that you did,” Orman said to Jean’s husband, adding that there’s a “tremendous difference” between the ages of 62 and 73 when it comes to keeping up with home maintenance and repairs.

If you’re in the same boat as Jean and her husband, you’ll need to consider two angles before reaching a decision — the financial side and the realistic side.

At first glance, owning a home can be a riskier prospect than renting. Surprise repairs could pop up at any time, especially as the home ages — and, finances aside, you’d have to consider whether you have the energy to upkeep the property in the first place.

You also risk rising property taxes (though some states do have property tax freeze programs in place).

Meanwhile, when you rent, you have the guarantee that your monthly costs won’t exceed a certain number, at least for the length of each lease you sign. That could prove to be less stressful financially when you’re living on a fixed income.

The couple that wrote to Orman had a substantial nest egg, in addition to a generous monthly income. However, the average baby boomer has only $120,300 in savings, according to Northwestern Mutual.

In addition, the average Social Security benefit is only $1,915.26 a month.

Therefore, renting may be the better option if you have limited savings and less guaranteed monthly income at your disposal than the couple who reached out to Orman.

If you’re still not sure what to do, hire a professional. A financial adviser can help you create a plan that fits with your desired retirement lifestyle.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.