San Fernando Valley and Simi Valley Homes for Sale

Trading Down v. Renting

Usually, trading down is financially savvier than becoming a renter. If you're able to pay for your new home in cash, your housing costs during retirement will be next to nil. The price range you should consider depends on a couple of factors:

How much other money do you have for retirement? If you're really pinched for money to live on during retirement, you may be willing to buy a considerably less expensive home to free up more money for living expenses. Until you run some retirement projections to see where you stand, though, you won't know how much or little you need to carve off your home's equity.

What do you want to buy? If your retirement dream is to live on New York's Upper West Side or near the water in Hawaii, you may not be able to trade down much. However, if you want to scale down and move out to the countryside, you can probably spend much less on your next home.

Trading down to renting

Some people sell their houses and simply rent in retirement. By selling, you free up all the money invested in your house and make it available to you to live on or do with as you desire. And, when you rent, you have more flexibility to move in the future. If you are considering selling your house and renting in retirement, be aware of these potential drawbacks:

Exposure to rental inflation:
As a renter, unless you live in a unit protected by local rental control ordinances, your monthly rental payment is fully exposed to inflation. $1,000 per month in rent today may not sound like a mountain of cash, but consider that, with just 4 percent annual increases, in 20 years, your rent will mushroom to nearly $2,200 per month.

Obeying your landlord:
As a homeowner, you get to call the shots. You can change the interior and exterior of your home as you please. As a renter, you are largely at the mercy and whims of your landlord. If you're used to owning your own home and not having to answer to a landlord, adjusting to the realities of tenant life can be difficult. Remember, also, that your landlord can sell the building, possibly forcing you to move again -- with added expenses.

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