Some Americans are ditching their mortgage to rent in retirement, and it shows how their lifestyles — and finances — are changing

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Joe and karen

While conventional advice says that mortgage-free homeownership is important to retirement, many American retirees are finding that renting better fits their lifestyle and their finances.
For retirees wanting to live a more active lifestyle than previous generations, owning a huge home doesn't have the appeal it used to.
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Retirees Joe and Karen Stermitz are done with homeownership.

"We owned homes all through our careers, and they turned out to be good investments," Joe tells Business Insider. They lived all over the US in 16 different homes, both owned and rented. Before Joe retired in 2016, they lived in a 4,000 square-foot home in southern Washington. It just wasn't for them anymore.

These days, their home is a six-foot by seven-foot overlanding vehicle they use to travel the world, and they plan to rent something more permanent when their adventure is over.

The couple wanted to start living their retirement dreams sooner rather than later, and found that selling their home was the best way to do that. "Selling the house wasn't so much a strategy as it was a necessity. It was the only way we could retire early," Joe says.

For this couple and a growing number of retirees, a combination of lower expenses, freedom, and flexibility are making renting more alluring than owning.

"I think that renting is a tool that's overlooked by many retirees," says Greg DuPont, a financial planner in Columbus, Ohio. He's seen retirees going against the traditional advice of having a paid-off mortgage in favor of renting, and considers it to be a smart financial move in some cases. "The whole notion of homeownership and building equity and transferring that equity down to the kids has been kind of a flipped on its ear by what happened in 2008," DuPont says.

For years, a paid-off mortgage has been seen as the key to a stable retirement. But today, increased costs of homeownership and changing lifestyles make renting a more appealing option than ever for many retirees. "When you start looking at the big picture when planning for retirement, and break free of those traditional notions of homeownership, you end up liberating yourself," DuPont says.

It's more affordable to rent than buy

DuPont says that his own parents have chosen to rent rather than own a home. "Even though they're renting a place for several thousand dollars a month, it's really the cheapest place they'll have," he says.

"People don't realize until they start really crunching the numbers that some of the changes in the tax code have reduced the deductibility of property taxes and local taxes, et cetera," he continues. "That really has made the price distinction between buying a home and renting closer than people think."

Renting isn't all that uncommon for retirees these days. As Lynnette Khalfani-Cox reports for AARP, "since 2005, Americans in their 50s and 60s have accounted for the largest portion of the country's increase in renters."

For many retirees thinking about moving, the places they're considering have much higher costs of living and homeownership than many other parts of the US. In the Phoenix, Arizona metro area, and the Tampa, Florida metro area — two of the country's retirement hottest destinations, according to MagnifyMoney — median home values are $259,000 and $242,000, respectively, according to Zillow. Those figures are both significantly higher than the typical median home in cities those retirees are leaving, like Cleveland, Ohio, where the median home value is $61,000, and Indianapolis, Indiana, where that figure is around $148,000.

From tax time to upkeep expenses each month, the Stermitzes have noticed a difference since they left homeownership behind. "Without the burden of the house and all of those expenses that come with it — the need to buy fertilizer for the lawn and drapes for the windows — without those, suddenly, you're liberated," Joe says.

Similarly, Edd and Cynthia Staton sold their Las Vegas home and have been renting in Cuenca, Ecuador since 2010. For them, renting opened up the possibility of a lower-cost lifestyle in another country. "We live in a two-story, four bedroom, four-and-a-half bath penthouse apartment," Edd says. "We don't own, we rent, and we've rented this apartment for almost a decade." While their rent is much cheaper in Ecuador than it would be for a comparable rental in the US, their decision to rent has given them the flexibility to live somewhere that is more affordable.

By the time they left the US in 2010, the Statons had watched their home value plummet by two-thirds. Their decision to rent has helped them save on taxes and other homeownership expenses, and most importantly given them the flexibility to live where it's affordable. "Our nest egg has actually grown instead of shrunk," Edd says.

Lifestyles and preferences are changing for all generations

People are tending to rent more frequently, and live longer in retirement than they used to. For retirees wanting to live a more active lifestyle than previous generations, and for much of the younger generation, owning a huge home doesn't have the appeal it used to.

"I don't need a big house. I had a big house, a 4,000-square-foot in Washington. But, it's nothing," Karen says. She and Joe aren't sure they'd want to own a home again.

"For me, the idea of not being tied to one place is so much more exciting. You get to meet new people and new friends, and can work on new charities," Karen continues. "I like the idea of maybe never owning a home again."

Inheriting a home isn't what it used to be, either. "The reality is that most kids don't want the home that mom and dad have," says DuPont. "They're really not preserving an asset for kids. All they're doing is building a bigger target that could end up being depleted by long-term care costs."

As the older generation starts to downsize, DuPont says renting could be helpful. "It's either buying a condo with all the regulations just so you have a home that is more size-appropriate, or looking at at a rentals," DuPont says.

"I think that renting is something that really should be used more as people design a future that way," he continues. And for many retirees, going the un-traditional way and renting is the right way for them.