A reader asks, “Leaving aside the emotional component, is it “better” for a retired couple to live in a rented flat rather than buy a flat with the sale proceeds of their home?”
This is a tough one as there are many factors to consider. Assuming they lived in an old independent house, the usual route is to get one or two flats in the same location, live in one and rent one.
Another choice is to buy a flat near children in another location or city. Yet another choice is to buy (or rent) a retirement home with the proceeds.
Living in rent after living in our own house is difficult unless there is a significant shortfall in the retirement corpus (forcing the couple to sell their property). There must be an extremely strong reason to do so. For example, staying close to children to help out with the grandkids, etc.
Even then, shifting houses, dealing with landlords, adjusting to a new locality, etc., can be painful in old age unless an excellent arrangement is in place.
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So, it is impossible to leave emotions out of the decision. Emotional and physical support in retirement is even more important than financial independence.
From the tone of the question, I think the decision has been made to sell the house. If that is the case, renting can be an option only if there is a strong reason: shortfall in the retirement corpus, helping out children, etc.
Buying a flat in the exact location or locality is a good idea if you value your independence, and retirement income is not an issue.
Buying a retirement villa with excellent amenities and support staff is an option if you think you need assistance, can benefit from the company of peers and can adjust to the new situation (which is tough).
So, as mentioned above, this is an extremely personal and, therefore, extremely emotional decision. I can only list possibilities as far as my thinking takes me.
When I am put in a spot like this, I can only ask, what would I do? Having lived in my own house all my life, renting would be difficult, especially in old age. I would prefer to buy a house in the same locality or a different location to be close to my child or buy a retirement villa if life allows me the time to prepare for supportive care.
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About The Author
Dr M Pattabiraman giving a lecture
Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 14 years of experience publishing news analysis, research and financial product development. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
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Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (Published by CNBC TV18) for DIY investors.
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want.
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Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain?
What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management.
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