Question: I am in my mid-50s and have never owned a home just rented, to the amount of about $125K+ in rent since 1997. As I am in the arts, I have had only a modest income over the last 3 decades, not enough to save to offset the value of owning a home and being able to sell it. I am also single. I have recently inherited some money. After paying off debt (and trying to stay alive financially in the last 24 months) I have only about $115K left that I have inherited, and another $55,000 in other retirement savings. I currently maintain a rent payment of $1100 per month. (I have also had to move 4 times in the last 15 years at about, $2K a move, not counting time, mental strain and resettling). If I can get a mortgage, I am considering buying a house/condo so I have more assets as I move into the twilight. Is this a good idea or not. Please advise? Thank you. Mason, Saint Paul, MN
Answer: I understand your concerns about renting as you age. But I would approach owning warily. My worry is that you'll end up worse off, with even more financial stress than now.
The reason is that you have an uncertain income and it appears that won't change. Renting has been the sensible choice all these years. Put it this way: What if you had owned over the past 24 months instead of renting when times were tough? Would you have been able to meet a mortgage payment or would you have lost the home?
The inheritance now provides you with a nice margin of safety. It also gives you freedom of choice, to do some things you'd like to pursue as you age. My concern with buying is that you'll end up with the financial stress of paying a mortgage well into the traditional retirement years and you'll have a much smaller margin of safety with the money invested in a home. After all, a home is expensive to own and operate. You don't want to live house poor in your elder years.
Of course, you're asking the right question. It's critical to think about where you want to live when you get older. It's all part of the process of planning for retirement. Home values are more attractive than they have been in a long time, too, so you may be able to get a good deal. By all means, run the numbers on home ownership. Visit some homes for sale. See what's available in the neighborhoods you like.
Try to envision what you'll be doing as you age and how will owning affect it. What are your expenses and what will they be in retirement. Then ask what else does the money allow you to do?
I just don't want you to end up living with more financial stress as you age. That's why I would be wary of investing your financial margin of safety in one asset--a home.