Should you buy or rent in retirement? The answer isn’t as simple as the generic advice you’ll find online. In this episode of Next Act Ninjas, Dr. Rachael Van Pelt breaks down the real financial, lifestyle, and emotional trade-offs for renting vs buying in your Next Act. From equity growth and liquidity to reverse mortgages, rising rents, and hidden healthspan factors—you’ll learn how to make a housing decision that supports both your wealth and your well-being for the next 20 years.
Should you buy or rent in retirement? The answer isn’t as simple as the generic advice you’ll find online. In this episode of Next Act Ninjas, Dr. Rachael Van Pelt breaks down the real financial, lifestyle, and emotional trade-offs for renting vs buying in your Next Act. From equity growth and liquidity to reverse mortgages, rising rents, and hidden healthspan factors—you’ll learn how to make a housing decision that supports both your wealth and your well-being for the next 20 years.
Chapters
00:00 Navigating the Decision to Rent or Buy in Retirement
01:40 Current Day Investment Reality Check
02:56 Taking Health into Consideration
04:11 Rent vs Buy: How do the 20-Year Numbers Stack Up?
10:28 Weighing your Options
11:23 Two Very Different Approaches
14:08 The Hidden Perks and Pitfalls of Renting or Owning
15:30 What Lifestyle do you Envision?
17:35 Emotional and Lifestyle Considerations
Hey, hey, welcome back to Next Act Ninjas, the go-to podcast for mastering your health and wealth longevity. I'm your host, Rachael Van Pelt. Today, I want to dive into one of the big questions that I get from my 60-something-year-old clients who are selling their primary home. Should they buy or rent their next home?
Unfortunately, I think the majority of advice out there for renting versus buying is written for younger, next gen who are looking to buy their first home. And look, when you're in your 30s and have a time horizon of 40 to 50 years, that's one thing. But for those of us in our late 50s, early 60s with a life expectancy of around 80, that time horizon is different, isn't it? If we expect to have just 20 healthy, active years left, we're not talking 40-year planning anymore, and we're not reduced to short-term five-year planning either. We fall somewhere in the middle. We want to position ourselves for the long game, but we recognize time is short.
Now by this stage of life, most of you probably fall into one of two groups. Either you've paid off your home completely, or you've at least built up enough equity that you could comfortably buy a smaller home with little to no mortgage at all. And if that's you, congrats. You are already in a strong position. But now you face a hard decision. If you sell your home, do you really want to tie up your newly freed-up equity in another home purchase? Or should you consider renting and keeping your equity more liquid?
Here's the reality check for 2025. Mortgage rates are hovering around 6.7%, much higher than the dreamy days of 3% mortgages. At the same time, rents are climbing nearly 3% year-over-year nationwide. And you don't want to forget those property taxes. They keep climbing, don't they? Which means no matter which way you lean, housing isn't cheap. That roof over your head is a big chunk of your monthly expenses in retirement, no matter how you slice it.
On top of that, it's not always clear where you want to park your money. Should you keep it invested in the real estate market, or would it do better in the stock market? Long-term appreciation of homes has historically averaged around 3 to 5% per year, 6 to 7% in the past decade. And that sounds great, doesn't it? But if we adjust for inflation, that appreciation often ends up about half that. So homes do tend to appreciate steadily, but they rarely make you rich in and of themselves. On the other hand, the S&P 500 has historically returned more like 8% adjusting for inflation. But those nice gains come with huge up and down swings that stress most of us out.
And speaking of stress, if we just stop thinking about finance for a moment and think about health, because we know healthspan is just as vital as healthspan, studies have consistently shown homeowners typically report fewer chronic health conditions compared to renters. But there's a catch. That health benefit mostly stems from the financial stability rather than home ownership itself. Owning can feel secure if you're mortgage free. But if financial pressures come up unexpectedly, that stability can vanish quickly along with the health benefits.
And we can't ignore the emotional piece. Many of you have told me personally how much you value aging in place, thriving in place. In fact, the vast majority of retirees say staying put in their home is incredibly important. There's just something comforting about the familiar, your space, your community, your routines. Yet for other people, there's a sense of liberation when it comes to renting. You're not locked into property maintenance or HOA fees. Maybe you've spent years tied to mortgages, lawns, roofs, so the simplicity and flexibility of renting just feels like freedom.
But let's look at the numbers. Suppose you decide to buy a $500,000 townhome or condo. You sell your large family home, you put $400,000 down, so you only need about $100,000 mortgage. Your monthly costs might be quite manageable. You just have a small mortgage payment, property taxes, HOA fees, upkeep. So let's say your monthly living expenses come out around $2,200 per month. Over 20 years, you're going to fork out a total of about $650,000. That includes everything, mortgage interest, increases in property taxes, increases in HOA fees over time, and so forth. If that home appreciates around 3 to 4% year-over-year, then your home could easily be worth close to $1 million two decades from now. It's not bad, right?
But remember, that equity was locked in your home. It was growing but essentially inaccessible without any kind of refinancing, selling, or taking out a reverse mortgage. Which means that you're going to pay that $650,000 in living expenses over the 20 years from other sources, such as your 401k or Social Security. Your net gain after accounting for those living expenses over 20 years then comes out to only around $350,000 ($1M minus $650K). And keep in mind, if you didn't need to take out a mortgage, you paid all cash for that home, your numbers improve, don't they? You'd be ahead at least another couple hundred thousand.
On the flip side, imagine that you rent instead. You find a nice rental unit. Let's say you're only paying $2500 a month. If you factor in rent increases around 3% year-over-year. over that 20 year period, you're going to pay around $800,000 total. So at first glance, it doesn't sound great, does it? You're immediately going to see that living expenses are going to cost you more in the rent scenario versus buy scenario, around $150,000 more. However, if you took that $400,000 house payment, the down payment that you would have paid and you instead invested it in the S&P 500, say an index fund with a conservative 6.5% rate of return, guess what? You could grow that $400K into around $1.4M over a 20 year period. That is assuming the stock market cooperates and you leave that money invested that entire time. You don't take any money out.
But hey, the main advantage of renting instead of buying is to improve liquidity, isn't it? if you put your money in the stock market, you have easier access to it throughout the 20 years. You don't have to wait to sell the home, right? yes, you're going to pay taxes on whatever you withdraw, but you don't have to wait until you sell a home to cash out. So what if we just use the 4% rule and we withdraw from that index fund throughout the 20-year period to cover at least a portion of our living expenses. What does that do to our portfolio? Well, the good news is that if that investment is growing at 6.5% and you only withdraw 4% of its value every year, it's going to keep growing, isn't it?
Even after accounting for all those withdrawals, you're still going to have something like $600,000 in your portfolio at year 20. In fact, you could bump up your withdrawal rate to 6% per year and end up in the same situation as the buy scenario. Now, would that 6% annual withdrawal completely cover your living expenses? No. But after accounting for taxes, it would cover a good portion of it on the order around $400,000 of the $800,000 total that you're going to pay over that 20-year period. So now you only have to come up with half of your rent every year from another, let's say 401k or social security, compared to funding all of your living expenses if you had bought.
Sounds great, doesn't it? But here's the catch. You must be financially disciplined enough to leave that money in the stock market to grow if you want to come out ahead. If you withdraw at a faster rate than the market is growing, obviously the portfolio is going to shrink fast. You're going to run out of money. Moreover, if the market hits a major downswing, especially early in that 20-year period, you're not going to make the same sort of gains. And ultimately, you're going to have less money to withdraw. That leaves you back to paying your rising monthly living expenses completely from some other pool of retirement funds. In that case, you're no better off than if you had bought your home. And worse, you wouldn't have enjoyed that peace of mind that comes with the stability of owning your home.
In short, renting offers tremendous flexibility without maintenance headaches, but it does leave you vulnerable to rising rents and major stock market swings. Renting and investing wisely could put you ahead financially, but there are no guarantees. Buying offers a tangible asset, long-term stability, and emotional comfort, but it reduces your flexibility and liquidity.
Another thing to consider if you decide to buy rather than rent is that your home equity isn't completely illiquid. You do have the option of tapping into that equity through an FHA-backed Home Equity Conversion Mortgage (HECM). We've talked about this in past episodes. That's also known as a reverse mortgage. After the age of 62, this is a great way to pull cash out of your home. But like any loan, it's not free money. Interest does accumulate behind the scenes. However, you don't have to pay that loan back until you sell the property or when you die and your heirs sell the property. So a HECM offers great flexibility if your health or financial needs change unexpectedly in your 70s or 80s.
When you weigh whether to rent or buy, ask yourself how much liquidity you think you're going to need over the next 20 years. Do you have enough income from other retirement funds to cover all of those living expenses? Or is your home a big chunk of your retirement nest egg, so you're going to need to free some of that money up. And what about your health trajectory? Are you anticipating needing more health care or mobility support down the road? Do you need a maintenance-free home? Is flexibility essential? Or would you prefer the stability and autonomy of owning your home? What about taxes? Maybe you're eligible for senior property tax breaks that renting wouldn't offer. And finally, how would it feel to you emotionally? How deeply rooted are you to having a place that's truly yours?
I want to compare two examples. Mary and Joe, they buy their dream downsize, a comfortable $500,000 townhome. They love having control over their space, hosting family gatherings, tending a small patio garden. They especially like that they don't have a mortgage or rent payment, just a small HOA fee, reasonable insurance and property taxes. After 18 years, their home is worth $900,000, so when Joe's mobility declines at age 78, they comfortably take out a reverse mortgage, accessing $400,000 of that equity to pay for his in-home care without needing to sell or relocate. They feel secure despite just the minor stresses of having to hire help out. They just plan to thrive in place.
Linda, on the other hand, she decides to rent. After selling her primary home, she invests all of her $500K into the stock market and chooses to rent close to her grandchildren. That allows her to move twice in an 18 year period. First to follow family and later after experiencing a minor health setback. She loves that she didn't need to sell her home when it came time to move into an independent living community. Although she doesn't love the regular rent increases, she does appreciate the regular income that she gets from her stock portfolio and she enjoys life without maintenance.
As you can see, both of those options, they can work well. It just depends on what matters to you. Owning offers stability, emotional security, asset building, but it does come with the burden of upkeep and less flexibility. Renting, on the other hand, provides easy relocation, lower upfront costs and simplicity, but it can feel uncertain sometimes, financially vulnerable, impersonal.
And of course there's always the option of some hybrid of those two approaches, isn't there? You could buy now and rent later. Maybe you anticipate that you're going to have to move into a senior independent living community in say 10 years. Ideally you could buy a downsize now in a market that's going to boom over the next 10 years. Buy low, sell high, right? And ideally, your health is going to be stable enough to handle selling and moving at that time. If so, you can just take the proceeds of your sale and reinvest it in the stock market in 10 years. This hybrid approach shortens the timeframes for both the home to appreciate and the stocks to start compounding. That does mean your bottom line's going to take a hit, but again, it's not just about finances, is it? It's about what's going to work for your lifestyle, your lifestyle longevity.
No matter what route you choose, there's always going to be hidden perks and pitfalls. For homeowners, the hidden pitfalls may be unexpected home repairs or increases in insurance and property taxes. For renters, the hidden pitfalls might be frequent rent hikes or the unexpected forced relocation if a landlord decides to sell. An emotional perk for homeowners is feeling deeply grounded in their space. For renters, it might be feeling a lighter, less encumbered lifestyle.
From a health perspective, owners tend to be more physically active because they're gardening, doing small home repairs, walking the neighborhood more frequently. But maintenance stress or isolation in a sprawling suburb can be detrimental as we get older. Conversely, renters can feel disconnected or transient. But in the right senior-friendly community, they might find built-in social activities and support systems that boost emotional well-being and physical health.
There's no inherently right or wrong choice, only what's aligned with your priorities, your fears, your dreams, your practical realities. You just don't want to underestimate the peace of mind factor. Financial decisions aren't just about dollars and cents. They're deeply emotional and profoundly personal.
A helpful way, I think, to weigh this decision is to consider your lifestyle aspirations. Do you envision lots of family visits, garden parties, projects around the house, or does the idea of letting someone else handle repairs while you jet off on vacation appeal much more? Are you comfortable having a tangible real estate asset that appreciates steadily, or would you rather aggressively grow your money in the stock market? Would you sleep easier in a home you own outright and no one can kick you out of, or in one that you can move out of quickly without the hassle of selling when circumstances change?
And don't forget that wild card, reverse mortgage. It's not a one size fits all solution, but as we age, financial flexibility does outweigh raw asset appreciation. Knowing that you can convert home equity into cash down the line can provide an important psychological safety net for many homeowners. Just make sure that you understand how reverse mortgages accumulate interest. And that potentially shrinks the inheritance that you're going to leave your heirs.
As you consider these scenarios, think of your decision as less of a pure financial choice and more as a strategic lifestyle move. Talk openly with your spouse, your financial planner, healthcare providers, and family. Walk through neighborhoods that you're considering and visualize daily life 10 and 20 years ahead, not just two years ahead. Your goal isn't just to maximize your bottom line, but to wake up each morning in a home that supports your healthiest, most joyful and vibrant life. Whether you choose to own or rent the home you select should nurture you, uplift you and empower your best next act.
That's it for today. Thanks for joining me for another episode of Next Act Ninjas. If you found this episode helpful, please share it with a friend facing this decision too. And hey, I know I run through the scenarios fast. So if you want
help walking through your own scenario and a spreadsheet to help run those numbers, schedule a consult call. You'll find my calendar link in the show notes.
Until next time, live well, love more, age less, my friends.