Suze Orman Says Retirees Who Own a Home But Want To Rent Should Be Aware of This Risk
Written by
Adam Palasciano
Edited by
Rebekah Evans
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Owning a home has long been a cornerstone of the age-old ” American dream.” If you’re a retiree who owns your home outright, kudos to you. This is no easy feat in today’s economy, with higher-than-average property prices and mortgage rates that are still quite high.
However, not all retirees want to own a home anymore.
In a recent blog post, financial guru Suze Orman highlighted a recent analysis showing that the percentage of Americans 65 years or older who own a home has fallen in the past 20 years, from 80% to 74%. The expectation? More older households will choose to rent in the coming years.
With a trend towards retirees renting rather than owning, Orman warned that they should be aware of this one risk.
Take Inflation Into Account When Choosing To Rent
If you’re going to sell your home and take the profit to put towards rent, it might not be a bad idea as you continue to age. Renting means you won’t be responsible for the cost of repairs, maintenance and regular upkeep of the property. It also means that you won’t have to worry about property taxes or homeowners insurance.
However, inflation will affect your housing costs. You’ll need to be prepared for the landlord to raise the rent from time to time. Even though inflation is finally cooling down, rents still tend to rise over time — about 4% per year, on average.
So, if you’re paying $1,000 per month for rent, expect your rent to be about $1,220 in five years and $1,480 in 10 years.
Based on a 4% average annual rate increase, rent typically doubles after 20 years. As a retiree on a fixed income, you’ll need to budget for future rent hikes so you can live within your means, stay out of debt and live out your golden years financially stress-free.
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