Is it better to rent or own in retirement?

Owning outright removes the biggest housing bill, but not all of them. Property tax, insurance, utilities, and maintenance keep coming, and insurance has been rising. Renting moves repairs and property tax to the landlord, but you have no control over rent increases.

The data show the difference in risk. In 2023, 58% of renters 65 and older paid more than 30% of income for housing. For older homeowners it was nearly 28%, and 19% for those with no mortgage, per Harvard's Joint Center for Housing Studies.

The case for renting is usually about the equity. Example with made-up numbers: you own a $400,000 home free and clear. Sell it and, if the money earned 4% a year, it would produce about $16,000 a year, or $1,333 a month, toward rent. Compare that, plus the owning costs you no longer pay, with the rent for a place you would want. Married couples filing jointly can exclude up to $500,000 of gain on the sale ($250,000 for single filers) if they meet the 2-of-5-years test.

Then weigh what money does not capture: owning protects you from being asked to move, while renting makes it easier to move closer to family or care later. Selling also means you no longer gain if home prices rise, or lose if they fall.

What the rule of thumb misses: the choice is not permanent, but switching is expensive. Selling and buying back in later costs fees each time.