Farrell: To own or rent? Many seniors weigh options

Q I read that at some point in one's senior years, it is better to rent rather than own a home. Is there any merit to this idea in 2012? I am 76, own a condo (no mortgage), and plan to remain until age 80 to 82, before moving to a senior independent residence. The senior residence monthly payment would be higher than my current property taxes and association dues. At age 82, rent or own?

A I haven't heard the calculation that in general it's better to rent than to own in one's senior years. Many older folks have voted "no" already to that idea -- with good reason. However, your idea of moving into a life-care community can be a smart move for seniors with the necessary resources. And there are complex and critical financing decisions to make before making that move.

Surveys are remarkably consistent: Older Americans want to age in their own home. The homeownership rate exceeds 80 percent for those ages 65 to 84, according to the Center for Housing Policy. Ownership has a number of attractions. One of the best ways to achieve a measure of financial and psychological security is to have paid off the mortgage by the early part of the traditional retirement years-- as you have done. You now have an important hedge against inflation. Landlords typically raise rents during inflationary times, whereas you're safe from rent hikes. A home also provides a measure of freedom. It's up to you and not the landlord whether you have a dog and cat.

Anyone who plans to age in place should do an internal audit of their home to see if it's safe and practical as you get older. Some remodeling might be advisable. Equally important is a "community audit" to find what services for the elderly are conveniently available in your neighborhood.

That said, renting can be a good move for some. For example, in better markets it can be financially savvy to cash in accumulated home equity gains, find a smaller place with a decent rent, and spend the savings on other things. My concern for senior citizens in the rental market is affordability. I expect rents will rise with higher demand.

As seniors get older the attractions of some form of community housing grow. For example, 15 percent of those 85 and older live in long-term care facilities and 7 percent in community housing where various services are available, according to the Center for Housing Policy. A draw for these communities is you don't have to move out of the complex when you get sick or infirm. You have neighbors, common dining facilities, activities and other amenities.

The big question mark with all these communities is cost. My main advice is to work with a professional to run the numbers and talk over the trade-offs with you so that you make the right decision for you.

Chris Farrell is economics editor for "Marketplace Money." His e-mail is cfarrell@mpr.org.

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