image via Wall Street Journal
image via Wall Street Journal

More retirees--especially those with large houses and inadequate savings-- are selling their homes this year, trying to unlock the equity they have secured during the housing recovery. But many have not yet decided on what to do next: rent a home or buy a smaller property. Wall Street Journal staffer Jane Hodges probes into the topic and breaks down the pluses and minuses of empty nesters renting in retirement.

"Renting has both advantages and disadvantages for older consumers. On the plus side, renters typically enjoy a wider range of housing options, flexibility (a one-year lease is a short-term commitment) and the fact that building managers handle repairs, landscaping and snow shoveling. A big financial disadvantage for older renters, however, is that as rising rents take a bigger portion of a fixed income, there is no offsetting increase in equity like there often is when you own a home. And rental prices can double over a 25-year period.

With median monthly rents on one-bedroom apartments now topping $2,000 in desirable urban areas such as Washington, D.C., New York, San Jose, Calif., San Francisco and Boston, according to apartment-rental website Zumper, plenty of baby boomers are choosing to buy. But instead of downsizing to something cheaper, many are buying homes at the same price point or higher than the one they just sold, a trend that concerns some financial planners."

Read more >