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You’re Retired. Should You Rent or Buy Your Home?


Say they did not have a mortgage and, after closing and moving costs, clear $480,000, which they invest in a portfolio divided equally between stocks and bonds. Their investments generate an inflation-adjusted $19,200 a year, based on a 4 percent distribution, so although they are spending more each year on rent, their annual cash flow rises by $7,200.

If this couple had a mortgage, the improvement in cash flow from renting could be even larger, Mr. Hopkins said. They eliminate the mortgage payments and other ownership costs and can invest the equity.

“That is a huge benefit for someone who has less than an ideal amount of money saved up in retirement accounts and is likely relying heavily on Social Security,” Mr. Hopkins said.

Retirees should also consider changes in the tax laws. Many home buyers who in the past would have deducted mortgage interest on a new home will be better off taking the standard deduction.

In 2020, married couples filing jointly can claim a standard deduction of $24,800, plus $1,300 for each spouse 65 and older. Congress also replaced the unlimited federal deduction for state and local taxes with a $10,000 annual cap. Residents in high-tax states, such as New York, Connecticut and California, are hit the hardest.

To help with a decision, retirees could ask a financial adviser to review the pros and cons of each option, and the impact on retirement savings and spending. Retirees can also use The New York Times’s buy-versus-rent calculator to work out relative costs.

Here’s how the calculator works: Say a retiree is thinking of moving to Charlotte, N.C., and has a choice between renting a recently advertised two-bedroom apartment or buying a similar one in the same building. The condo is priced at $349,000 while the monthly rent runs $1,650.

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