Does anyone plan to retire without a house and possibly just rent in retirement?
Any advice, insight, or thoughts are appreciated.
In retirement I want to move to rent/buy in a LCOL – MCOL area.
I’m not completely opposed to eventually buying a house in the future but I’m using my current living situation (details in post) to my advantage for as long as feasible. Maybe life circumstances like starting a family could change but I’ve also never wanted to own a home for equity reasons and sometimes feel like banking my money and just renting in retirement could make sense.
I’m 34, single, in the US, and it would be nice to retire hopefully in my late 50s to be a little optimistic or at most 62 taking Social Security early as I’m hoping I’ll be financially set up for it. I’ve been prioritizing Roth contributions as I’m in a case where I will make more money in retirement.
This is what I have so far.
$134,000 in taxable brokerage.
$61,000 in Roth IRA.
$25,000 between a Roth & Trad 401k (currently at 6% trad & 44% Roth contributions but sometimes will lower the Roth % if extra cash is needed.) Work matches 100% up to 6%.
$6500 emergency fund in HYSA (maybe could be higher? but my expenses are fairly low.)
Have a fortunate situation where I live in a paid off house, so I really just pay the taxes + monthly bills. After tax income is around $55k – $60k depending on how much I tweak my Roth 401k. I’m in a LCOL area with not a lot of overhead. I’d say average monthly spending is around $1400-$1800.
I currently invest by getting my 401k 6% match(traditional)
Then max out my Roth IRA
Then the rest goes to my Roth 401k and Taxable brokerage.
Mostly invested in low cost US Market ETFs, some international market ETFs, and 1% in stocks I’m holding on to. With my low overhead especially with my vehicle being paid off last year, I’m putting in around $30k – $35k a year between my 3 accounts depending on spending habits.
Not sure if there’s anything more I can do. When I calculated what I currently have + yearly market contributions with dividends reinvested, I get an estimate in 25 years at $3.3M – $3.7M (assuming 7% avg return annually.)
I feel like I’ve had a good grasp on my finances. I suppose I’ve just always had a little trouble thinking about retirement since it has always been decades away.
If everything plays out okay I plan on selling around 3 – 4% a year in retirement for my income.
Do people buy a later in life closer to retirement? Like getting a 30 yr Mortgage in your 50s seems a little unusual? I could see how having a home to pass on after I’m gone being a nice thing, but I could equally just build up money instead to get passed on?
Rent vs Buying home as I get closer to retirement
byu/ScarLNoBigD inpersonalfinance
Posted by ScarLNoBigD
4 Comments
Do you own this paid off house?
>but I’ve also never wanted to own a home for equity reasons
I have no idea what this means.
Either way, this is the personal part of personal finance. If you want to rent forever, there is literally nothing wrong with that, you’ll just need to consider what the costs will likely be and account for that.
Considering you live essentially rent free, I would keep that situation as long as you can stand it.
What’s the difference between a long term lease and a mortgage? Do you plan on moving again before you settle permanently? If you don’t care about ownership or passing down anything to children then I really don’t see a huge benefit to buying.
There are tradeoffs for everything.
Pros for owning a home
– it is yours once paid off (only property taxes and upkeep are needed)
– you are insulated from rising housing costs, especially if your area where you live becomes a growth hotbed
– you can theoretically make money from this by selling and pocketing any profits
Cons
– it is difficult to move if the area isn’t highly desirable and you can’t afford to just hold onto the real estate
– upkeep costs are not zero, so you have to account for things like roof/water heater/ appliance repair or replacement
– it is usually more expensive to own a home while you are making payments on the mortgage
There are surely other things but off the top of my head these are the big things to consider on home ownership. The other stuff to me is personal, (do you like suburban living, or do you like being in a city, etc?)