At age 65, deciding whether to rent or buy depends on your financial situation, lifestyle goals, and tolerance for responsibility; buying offers equity, stability, and tax benefits but brings maintenance costs, while renting provides flexibility, less hassle, and frees up cash for investing but lacks equity and faces rent increases. Consider your health, need for mobility, and desire for community versus independence, as both paths have significant financial and personal trade-offs.
Many financial experts suggest that renting is preferable because it allows you to decide where to invest your money. Also, if funds are tight, renting gives you more disposal capital so you can enjoy a higher quality of life.
If you're 65, you're not too old to buy a house — provided you have the finances to make a down payment, cover your monthly mortgage payments, and keep up with expenses like maintenance and property taxes. In fact, the Equal Credit Opportunity Act forbids mortgage lenders from discriminating based on age.
In 1998, 26% of Americans ages 65-74 held home-secured debt such as mortgages, yet by 2022, that grew to 32.2%. 1 This trend is particularly pronounced among those ages 75 and up, with 27.6% holding home-secured debt in 2022, up from 11.6% in 1998.
Mortgages make up about 70% of household balances. Conventional wisdom has long recommended that homeowners pay off their mortgage before retiring. Yet over the past three decades, more older adults are carrying their mortgage into retirement, while the amount owed has increased dramatically.
By age 65, you should aim to have 8 to 12 times your pre-retirement salary saved, meaning around $1 million for a $100k earner, though some suggest closer to $1.5 million for comfort; this varies greatly by lifestyle, location, and other income sources like Social Security, with a more personalized calculation using a retirement calculator being best. Key factors include your expected retirement spending, life expectancy, and planned income streams.
A reverse mortgage, also known as a home equity conversion mortgage (HECM), is the most common mortgage taken out by seniors: Backed by the FHA, it allows homeowners 62 and older to borrow against their home's value.
Retirement Regret #1.
Retiring as soon as possible can be a priority, but retiring too early can be a big mistake. For one, premature retirement can mean gambling with your financial security in the future. If you leave work too early, you could be forfeiting some key, higher-earning years to build up your savings.
The $1,000 a month rule is a retirement guideline suggesting you need about $240,000 saved for every $1,000 per month in desired income, based on a 5% annual withdrawal rate (5% of $240k is $12k/year, or $1k/month). It's a simple way to set savings goals, but it doesn't account for inflation, taxes, or other income like Social Security, so it's best used as a starting point, not a complete plan.
Key Points. The 4% rule is a popular strategy for managing retirement savings. Suze Orman thinks 4% may be too aggressive a withdrawal rate today. She recommends a more conservative approach coupled with other means of attaining financial security in retirement.
The 5% rule for rent vs. buy helps decide by comparing the unrecoverable costs of owning a home to rent, suggesting you should buy if monthly rent for a comparable home exceeds 5% of the home's price divided by 12 (Property Tax (1%) + Maintenance (1%) + Cost of Capital (3%)). Essentially, calculate (Home Value * 0.05) / 12; if renting a similar place costs more than that number, buying might be better, but if it costs less, renting allows you to invest the difference.
However, most lenders still require your score to be at least 600 for an insured mortgage, even with a co-signer. How long does it take to raise my score enough to buy a home? Raising your credit score enough to buy a home (typically up to at least 600–680) can take anywhere from about 3 to 12 months.
The average retiree's monthly expenses in the U.S. hover around $4,600 to $5,400, with younger retirees (65-74) spending more, often over $5,000 monthly, while those 75+ spend closer to $4,400 as transportation and entertainment costs decrease, though healthcare costs can rise, with housing, transportation, healthcare, and food being the biggest categories.
The top ten financial mistakes most people make after retirement are:
Only a small percentage of Americans retire with $1 million or more in retirement savings, with figures from the Federal Reserve and Employee Benefit Research Institute (EBRI) showing around 3.2% of retirees hitting that mark, though some sources cite slightly lower numbers for all Americans (around 2.5%) or higher estimates for households nearing retirement (over 10% of older households have $1M+ net worth, not just retirement funds). The reality is most retirees have significantly less, with the median for ages 65-74 being around $200,000-$609,000 in retirement accounts.
Suze Orman strongly advocates paying off your mortgage by retirement for financial freedom and peace of mind, but her advice on how varies by situation, often prioritizing a solid emergency fund and retirement savings first, especially if interest rates are low. While she pushes for paying down debt aggressively (even reducing retirement savings beyond the 401(k) match), she cautions against draining savings for low-interest mortgages if it leaves you vulnerable to job loss or emergencies, suggesting you should have a strong safety net before using savings to pay it off.
If you haven't saved enough for retirement or put a premium on investing: If you're not maxing out contributions to your 401(k), IRA or other retirement accounts (or making larger catch-up contributions if you're eligible), it's generally advisable to do so before considering paying off your mortgage.
The study showed that 97.1% of Americans aged 66 to 71 have debts that are not mortgages. The most recent Federal Reserve Study of Consumer Finances was in 2022, and that showed that the average debt for older adults is between $95,000 and $172,000.