US. Why Owning A Home Can Be A Valuable Retirement Asset
Is home ownership a mistake in retirement? That’s what this article in USA Today claims. In continuing the theme of my last article about not believing everything you read in personal finance, let’s look at some reasons why owning a home free and clear of a mortgage can be one of the best assets you can have in retirement:
Your variable costs are lower
As the article points out, it’s true that property taxes and maintenance costs increase over time with inflation. However, those costs are still passed on to renters in the form of rising rents. On the other hand, inflation can also cause rising real estate prices, which act to your benefit as a homeowner (more on that later).
You reduce “sequence of return” risk
Of course, not owning a home outright means you can have more invested in the stock market. When you’re working and planning for retirement, that’s a good thing since the rate of return in stocks tends to be higher than the cost of a mortgage. (You’re better off investing money at a 7-10% rate of return than paying down a mortgage at a 3-4% interest rate.) But when you’re retired, the money to pay those rising rents often comes from selling your stock investments.
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