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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire on Time, a show that answers your retirement questions. My name is Mike Decker along with David Franson over here, and we're gonna be taking your questions. Just text them right now to (913) 363-1234, and we'll take them one at a time. Again, that number, (913) 363-1234. Let's begin.
David:Hey, Mike. Is it better to rent or buy a home in retirement? This is a really tricky question.
Mike:Yeah. So you've got really three options, the way I see it. You can rent where you have no landlord responsibilities, as long as you're not setting your kitchen on fire. Right? The landscaping's taken care of, the roof, the house, all of that.
Mike:You're renting a nice condo. There's a community. Like, those things, they have their conveniences. But your rent, you will pay for the rest of your life, and that will increase with inflation. Now you might say, well, my house currently is worth, let's just do an arbitrary number, 500,000.
Mike:So 500,000 growing at a reasonable rate should be able to pay for rent for the rest of my life, and that is kind of true in that sense. And you've got no responsibility, But you don't have control over many other aspects of your life, so there's benefits and detriments. I've known many people that when they get closer to retirement, just sell their house and do this. And for those people understanding these risks, have no problem doing it. Love it.
Mike:All on board for that option. For other people, they like being a homeowner. They like maintaining their house. They like the gardening. They like having the freedom.
Mike:I think of, specifically, people I know in Southeast Kansas, the fact that they can do whatever they want in their backyard. Big gardens, little gardens, they can make a a jump if they had, like, I don't know, motorcycles, whatever. Like, some people like that freedom of just doing whatever they want to their property. Your benefit is you can pay off your house, and all you've got worried about is the taxes on your house each year, which you don't pay taxes on your properties if you're renting because you don't have a property, but it's incorporated in your rent. So let's be fair about that.
Mike:But aside from taxes, which you have no control over, they'll probably increase over time. Your expenses are your time and your labor on maintaining your property, updating the roof, updating the water heater, the AC unit, things like that. Those are smaller expenses, hopefully, all things considered with rent, but they're gonna pop up from time to time, and you gotta be aware of that. In addition to the homeowner bit, do you have the energy to mow the lawn and and take care of the property? And maybe you enjoy that for time being.
Mike:Maybe you've got a riding lawn mower, and it's just really fun to kind of ride around. Yeah. They look I don't have one, but they look
David:really fun. They do. You could do your name into the grass, right, in the pattern or something.
Mike:Or just do circles. Yeah. So it looks like aliens landed or something.
David:There we go. Yeah. The neighbors talking.
Mike:Yeah. And then you've got that option where maybe the local neighborhood boy mows the line after that. I mean, you've got flexibility of it. Right? But you're taking on a responsibility that you have to want.
Mike:And then the third option, which is the hybrid between the two, is you might buy a property where it's basically taken care of for you. So the lawns are taken care of. They're beautifully manicured and all of that, but you've got less say over what you can do in the property. You're paying HOAs, so that's like paying a partial rent. You might own the house, but you're paying a small rent that will probably increase over time to take care of the landscape, to take care of the local pool or whatever it is.
David:Yeah.
Mike:So there's no way to get out of a maintenance less property, because you're either paying for the maintenance, whether you own the property or not, or you're putting in for your time. Like, it's just a blend. And what is right for you is gonna be different than what is right for someone else. Downsizing or maintaining your current house, that's another conversation. Knowing you maybe wanna live in this house until you can't live in this house, and then do you move in with the kids?
Mike:And if you move in with one of the kids, are they gonna be compensated for the extra work they're putting in for maintaining you now from that point on? Do you go to a retirement community? Is that a one time payment for a certain period of time, or is that rent? These are things you need to talk about that will affect how your plan is curated. And by the way, if your plan is built on fixed income, not bond income, though I guess you could argue that that's kind of the same thing, or lifetime income annuities, be very careful about how all of these options, all of these factors are subject to inflation.
Mike:And will it get more difficult to maintain rent payments or HOA payments and other associated maintenance or your house maintenance with rising costs with this flat income stream? So just proceed with caution as you explore the options. There's no such thing as a riskless retirement. There's no such thing as a perfect investment product or strategy, but slowing down and asking these questions and how you want to paint your picture can really help put the right plan together and then put the right portfolio together. Remember, the portfolio should support the plan.
Mike:The plan is not supposed to be built around the portfolio. Plan first, explore the strategy second, then pick your investments and products to bring it all to life. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time.
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