There’s a widespread belief that homeownership is the best financial path, but for many seniors, it’s a costly mistake that empties their wallets and makes end-of-life planning a nightmare. But how can the American Dream of owning your home backfire so badly? Consistent bankrolling.
Many homeowners, especially in high-tax states, are finding out in retirement that even though their mortgage is paid off, they still have to dish out hundreds, sometimes thousands, every month to retain ownership of their home. Renting may be the cheaper and less stressful option.
Continuing to Pay Monthly Homeowners’ Expenses When You Don’t Have an Income
Your mortgage payment is almost always your biggest monthly living expense. If you bought your home early enough or opted for a shorter term, you can be mortgage-free by the time you retire. Some seniors even push off retirement a few years until their home is paid off.
However, even without a mortgage, you’ll still have many of the following monthly expenses:
- Utilities – Electric, water, gas, oil, sewer, and trash removal are monthly (or quarterly) expenses that remain long after the mortgage is paid. Hawaii, New Hampshire, Connecticut, California, and Alaska have the highest overall utility costs.
- Homeowners Association fees – As long as you live in your home, HOAs expect you to cough up those monthly fees. While these dues range by region, complex, amenities, and more, states with the highest average monthly include New York, D.C., Hawaii, Missouri, and Arizona.
- Maintenance costs – Mowing the grass in the summer, raking leaves in the fall, shoveling snow in the winter, and even keeping the gutters and downspouts clear in the spring are all services that you may need to pay someone to do on your behalf.
If you live in a large, detached house, you likely pay more for utilities than if you lived in a smaller rental. And many rentals include utilities like water, sewer, trash, and recycling, so you don’t have to worry about rates increasing. In some cases, heat, gas, and electricity may be part of your rental payment.
As the name implies, you are not responsible for HOA fees as a tenant. Your landlord will take care of those fees, if required, and generally pay for any monthly lawn or property care.
While some might argue that these are built into your monthly rental cost, that amount is fixed for the term, so you know what to expect instead of dealing with variable costs.
Annual Expenses Homeowning Retirees Need to Budget For
Even if your biggest homeowner’s expense is over, that doesn’t mean you’re not still on the hook for thousands yearly. Being a homeowner means budgeting for the following annual expenses:
- Property taxes – You must pay taxes on your home for the duration you own it. And unlike a fixed mortgage rate, the amount the government demands can change over time (it usually increases). New Jersey, Illinois, Connecticut, New Hampshire, Vermont, and New York have the highest property taxes. If you own a $500,000 home in one of these states, you could continue to pay between $6,500 and $12,000 annually.
- Homeowners insurance – Likewise, you’ll still need to (or want to) pay for insurance coverage. States that have the highest insurance rates in the country are the ones with high exposure to natural disasters, such as Florida, Louisiana, Oklahoma, Nebraska, and Kansas. For example, the average annual premium in Florida is around $7,000 a year.
- Home repairs and services – Nothing lasts forever. Appliances break, roofs leak, HVACs break, etc. Plus, many parts of your home need annual (or quarterly) services. Older homes typically require more maintenance than newer homes. Average annual costs could run between $2,000 to $7,000+.
In a rental, you’re not responsible for taxes or HOA fees, rental insurance is often cheaper, and you don’t have to worry about a major home repair expense draining your savings.
Being a Homeowner Usually Means a Lot of Physical Labor
Owning a home will cost you more than just money. Maintenance takes a physical toll (even if you outsource most of it). From lawn care to housekeeping, it’s a lot of work to maintain a home:
- Daily physical tasks – Dishes, vacuuming, cleaning the bathroom, and laundry are necessary whether you own or rent. However, the bigger your house, the more effort it takes. So, if you have multiple bedrooms, even if it’s been decades since your kids left the nest, you may be doing more than you need to. You could hire a housekeeper, but that’s an extra expense.
- Seasonal physical tasks – Again, you can hire someone to clean your gutters, cut your grass, rake leaves, etc. But you need to know when there is a real problem, such as if a pipe bursts in your crawlspace, or if you need to clean your refrigerator coils. While getting on your hands and knees or climbing a ladder might not be an issue in your 60s or early 70s, time is a cruel mistress to us all.
- Scaling your home – As mentioned, your family home may no longer meet your needs. If your bedroom is upstairs, you may grow tired of traversing it two to five times a day. If it’s just you and your spouse, the formal dining and living rooms are just extra rooms to keep tidy. And a walk-in shower with a grab bar may be a safer bet than a full-size tub. Even carrying groceries inside can feel burdensome if you’re living in a house that’s too big for your needs.
A rental unit can eliminate many physical chores by making them someone else’s responsibility. If something happens to your faucet, rather than dealing with it or even calling a plumber to come (when possible), the building super could handle it before it becomes a big problem.
Renting Means Access to Amenities and Safety
If you move into a senior living community, your unit should have more safety features than other rentals, such as:
- 24-hour emergency call systems (like pull cords) are installed throughout the unit.
- Fall prevention features, like grab bars, handrails, non-slip flooring, and low-threshold entries.
- Wider hallways and doorways to accommodate wheelchairs and walkers.
- Gated entries and surveillance, like security guards, cameras, etc., for extra protection.
- Proactive protocols, such as wellness checks and first-aid trained personnel.
These features are not only beneficial for your well-being but also save you money that you (or your family) might spend on caregivers and other services.
By Admin –