Renting in retirement

Owning a home is often seen as the great Australian dream, and as the old adage goes, “home is where the heart is.”

Sometimes finances or a change in personal circumstances warrant the consideration of renting.  It begs the question, is homeownership truly all it’s cracked up to be? Could renting in retirement provide a positive outcome?

In this article, we explore some considerations when choosing to own a home vs. renting, and share some positive aspects of renting.

Benefits of Renting:

• Financial Flexibility: For many, the home is their biggest asset. If you have exhausted your superannuation and savings, selling your home can release capital to provide ongoing cash flow, ensuring you can maintain your lifestyle.
• Lifestyle Flexibility: Renting allows you to move more easily if your needs or preferences change. Proximity to healthcare services and other amenities is important as you age. If your current home isn’t suitable for aging, renting could offer a more accessible property.
• Location Flexibility: Selling your home might allow you to relocate and rent in a more desirable area or closer to family and friends, even in a suburb where you can’t afford to buy.

Considerations owning a home vs renting:

• Cash Flow: Consider the ongoing rental payments and how they compare to the costs of homeownership, such as maintenance, rates, and insurance. While rent may be higher, renters don’t worry about maintenance and repairs, which can be beneficial as you age.
• Centrelink: The Age Pension means test includes the value of any money received from selling your home. This could affect your entitlements. However, non-homeowners have a higher asset test threshold and may be eligible for rent assistance, softening the blow to your Age Pension.
• Emotional Attachment: Moving can be a significant adjustment. Owning your home can provide stability and security, whereas renting might bring uncertainty with lease renewals and potential rent increases.
• Lease Terms: Understanding the terms of a lease agreement is crucial. Ensure the lease terms align with your long-term plans and financial situation.
• Tax Considerations: The principal place of residence is generally exempt from Capital Gains Tax (CGT). Selling your home means you can take advantage of this exemption.

Summary

The decision to sell your home and rent as a retiree in Australia involves weighing financial, lifestyle, emotional, legal, health, and estate planning considerations. It’s a complex decision that benefits from thorough planning and professional advice.