In retirement, every dollar counts, and determining where you can best afford to live is critical. That decision comes down to either owning or renting a home. While income and lifestyle preferences are important factors, retirees should consider other key decision points.

• Mortgages offer price predictability.
• Renting offers flexibility when relocating.
• Renters aren't expected to handle home maintenance
• Homeownership builds equity.
• Rent may cost less in the short term
• Homeowners receive tax breaks.
• Renting offers a convenient lifestyle.

The price predictability of a mortgage

Ownership has its advantages if stability is a priority. Standard 15- or 30-year mortgages have fixed interest rates and fixed monthly payments. If those payments are made on time, there’s no threat of losing a home.

That’s not always the case with rentals. Retirees could find that their landlords want to sell the home, often on short notice, which would mean looking for a new place to live.

Additionally, owners may opt to raise the monthly rent, reducing pricing stability for retired renters. “Many retirees who were renting during the pandemic in my area had to relocate because they didn't have equity in a home and prices jumped 30% and higher,” says Jeff Lichtenstein, a real estate agent and owner of Echo Fine Properties in Palm Beach Gardens, Florida. “Homesteading and owning would have protected against that occurring.”

Renting offers flexibility when relocating

Renting makes sense when retirees move, allowing for less commitment and more flexibility before purchasing a home. In general, the farther away you move, the better it is to rent first and see if you like your new location. This is especially true when relocating outside the U.S. to popular retirement destinations such as Portugal or Costa Rica.

“That gives you time to get to know the community and assess its fit to your lifestyle without the burden of long-term ownership,” says Alexei Morgado, a real estate agent in Hialeah, Florida. Renting also spares you the expense and complication of purchasing a home in an unfamiliar area, Morgado notes.

Renters aren't expected to handle home maintenance

Renting in retirement generally means you won't be expected to take care of home maintenance tasks. You may have to pay more if you live in a retirement community with a homeowners association that charges maintenance fees, but you’re free to enjoy your golden years with no particular obligation to handle repairs or cut the lawn. That luxury gives rental-minded retirees more time to enjoy a game of golf, pickleball or other hobbies.

Homeowners are building equity

One major financial advantage that homeowners have over renters is that mortgage payments go directly to paying down the house. That helps a retiree build equity over time, bringing retirees a stable financial future, especially if the home’s value rises.

Once the homeowner is in retirement, that price appreciation could lead to a profitable home sale and, if the retiree wants to downsize, more income assets. “It’s an investment that pays off when the home values increase and gives a sense of permanence and independence in one's golden years,” Morgado says.

Rent may cost less in the short term

Retirees who rent can garner some home price breaks that owners have to pay for.

For example, renters usually don’t pay property taxes, homeowners insurance or HOA fees, at least not directly. They don’t have to pay for major repairs, either. Without those financial obligations, renters can wind up with more cash to enjoy in retirement. Downsizing from a larger home to a smaller one will likely lead to lower monthly payments, which could add to your retirement savings.

Homeowners receive tax breaks

U.S. retiree homeowners also receive a major tax break or two that can increase their income in retirement.

For example, any U.S. citizen who has owned a home for two years or more is eligible for long-term capital gains of $500,000 for married couples and $250,000 for single property owners for the 2025 tax year.

To become eligible for the exclusion, the homeowner must own and occupy the home as the principal resident and must have owned the home for at least two of five years before the house is sold. That deal is good, whether it’s a home, apartment, condominium or mobile home.

Renting offers a convenient lifestyle

If you want to rent in retirement, Lichtenstein advises renting smaller and furnished units. “Make it easy on yourself,” he says. “Your lifestyle is going to change in ways you aren't accustomed to after your working years.”

For instance, people who leave the workforce unexpectedly have more time on their hands. “Dinner at home with kids and time commuting from work changes,” Lichtenstein notes. “Hobbies one didn't explore increasingly become important. Your social circle replaces kids and work.”

A new retiree lifestyle also means the type of house you need will change. “For example, you don't need a formal dining room as you go out more,” he adds.