Below is an excerpt from the book Downsize Sooner than Later – 18 Rules for Retirement Success available on Amazon.com.
An important subcategory of controlling long-term expenses in retirement relates to the question of whether to rent certain possessions or to own them outright.
It could be you identify certain items you enjoy very much, but that are expensive and high maintenance. These items may not be conducive to long-term ownership during your retirement years.
One potential answer that enables you to still enjoy certain possessions is to “rent versus own.”
Things to Rent Versus Own
Some examples of things that can fit this category are motorboats, sailboats, campers, RVs, racing cars, sports cars, off-road vehicles, golf carts, ATVs, jet-skis, wet-bikes, vacation property (non-income producing), time-shares, sports gear (snow skis, water skis, diving equipment), expensive part-time hobby items and equipment, horses/tack, etc.
Consider the following examples, illustrating the upside of renting versus owning:
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- Alex and his son love to four-wheel drive. Rather than purchase a trailer (and insure, maintain, and license the trailer), store, maintain, and insure ATV equipment of their own, they have found a nearby recreational vehicle park from which they can rent ATVs when they feel the urge to go off-road. This costs them a fraction of the price of ownership and is far less hassle. When they finish a weekend trip, they simply hand the keys back to the park office and say, “Thanks!”
- Glenda and Bill love to travel the country to visit America’s many national parks and monuments. Rather than own a large RV with its costs for purchase, licensing, depreciation, maintenance, storage, and insurance, the couple deploys a mixed strategy of renting SUVs and using an app which helps them discover surplus hotel rooms at discounts near the attractions they wish to visit. This approach offers them a great deal of variety, lower stress, and they have stayed in many interesting places over the years all for substantially less cost and effort.
- Edna and George developed a love of boating on America’s ocean inlets connected to the Inter-coastal Waterway. It started on their honeymoon, when they were invited to a day of sailing and became hooked on the gentle breezes and marsh views. They researched owning a boat of their own and were surprised by the accumulated costs of purchasing, trailering, insuring, licensing, maintaining, fueling and storing a modest saltwater-capable boat. Today, when the couple gets the urge to cruise the waterway, they use a rental service. It is just as enjoyable, ends up being a fraction of the cost of owning, and is essentially worry-free.
- Alex and his son love to four-wheel drive. Rather than purchase a trailer (and insure, maintain, and license the trailer), store, maintain, and insure ATV equipment of their own, they have found a nearby recreational vehicle park from which they can rent ATVs when they feel the urge to go off-road. This costs them a fraction of the price of ownership and is far less hassle. When they finish a weekend trip, they simply hand the keys back to the park office and say, “Thanks!”
We see with these examples that success is not about willful deprivation or forgoing the things you love. Instead, it is about objective and design. Of course, there are some things that can be owned affordably, and the point isn’t to purge your life of all possessions.
Rather, the point is,
Be intentional about what you own and what you are willing to pay.
If it is possible to find equal or greater value without the cost of ownership, renting can offer a win-win over the long haul.
Things to Own Versus Rent
Here we see that the reverse of the above idea can also be true. There are at least two items you should consider owning outright for the long haul. These are:
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- A smaller, nicer home.
- At least one reliable vehicle.
The reason these items are candidates for ownership is that they have the potential to be necessities over the long-term.
If you own these items in an affordable and deliberate way, you can end up saving yourself expense over time, and you can limit your physical and emotional stress.
For many people, a “smaller nicer home” may mean a house, garden home or condominium with no more than two or three bedrooms. This would be a home that is updated – newer roof, windows, HVAC, and appliances – that demands reduced overall operational expense.
There is an upscale community near where I live in which the home values frequently run into the multi-millions. Close by, a developer put in condominiums that meet the criteria of “smaller and nicer.”
Most are two-bedroom units, some with offices and they are gorgeously appointed. There is an association fee, but for most residents, the fee is a fraction of what their prior costs were for maintenance and upkeep of much larger, more elaborate homes.
Imagine: no mortgage, no lawn to mow, no snow to shovel, no mulch to sling, no weeds to pull, no roofs to repair, etc.
When you want to take an out-of-town trip, set the alarm, lock the front door, and hit the road. Simple. Easy. Uncomplicated. Low cost and, for the most part, worry-free.
Of course, this is an ideal example and the people who use it have the means to do so, but the underlying concept can be applied across a broad spectrum of economic circumstances.
For many, an updated one or two-bedroom ranch house with a smaller yard and a single floor of living space may work out well.
The goal is comfortable, paid-for, low-cost, low-maintenance, and sustainable.
When it comes to vehicles, the same strategy applies. Depending on where you live, you may always need at least one reliable car for daily living. As I write this, the workhorse for my family – the vehicle that goes to doctor appointments, the grocery store, the office, for short out-of-town trips, and is our “daily driver” – is a reliable and highly-rated SUV.
While comfortable and nice, it is not a high-cost, high-maintenance, or high-status brand. Being more common, it is less costly to own, less costly to insure, and less costly to maintain.
In some instances, it may make sense to rent (i.e. lease) a vehicle or a home at a late stage of retirement.
This could be to achieve a living environment with virtually no maintenance and worry. However, if you intend to rent such critical items, the income required to pay the rent must be rock-solid.
You want to know for sure that you can keep a worry-free roof over your head for as long as you and your spouse will need it. Going broke paying high rent, only to end up without a home, is the opposite of security.
Depending on your finances, there is room to be creative, but keep the underlying goal of paid-for, low-cost, simple, and sustainable.
A few additional examples:
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- June lost her husband five years ago. The two of them had retired to a smaller home in Florida, in which they spent many enjoyable years before her husband’s passing. June has two sons living in the Midwest, in homes with extra space. June sold her Florida home and now alternates living in the extra bedrooms of her sons’ homes. She is super-easy to get along with and poses the boys no trouble. June recently paid cash for a small, newer, reliable SUV she uses to get around town. She has reinvested the proceeds from the sale of her prior home and these funds continue to compound. Every year, she takes the boys and their wives on a vacation trip, for which she pays. Her life is inexpensive, low-stress, and spent in the company of people she deeply loves. To top it off, every year, her wealth and future legacy continue to grow.
- Alex and Mara sold their family home in their upper 80s and moved into a garden-home style rental community designed for people over the age of 50. They use a combination of guaranteed lifetime income sources – not dependent on the stock market – to more than meet their monthly rent and expenses. The absence of stairs has made it much easier for Alex to get around than in their prior home. Free from worry about maintenance and upkeep, the couple has more time and energy to focus on reading, volunteering, and enjoying time with their children, grandchildren, and great grandchildren.
- Jane and Orville sold their family home in early retirement and purchased a comfortable two-bedroom condominium with cash from the proceeds. They have one reliable car that acts as a daily-driver, and they keep their living expenses low. The couple’s combined Social Security income and minimal pensions far exceed their monthly bills. Due to their smart lifestyle choices, the couple has continued to contribute to their long-term savings. This increases their security and adds to their future legacy. Feeling far from limited by their lifestyle, they both love reading biographies – which they check out from the local library – watching tennis via digital stream, and spending quality time with their children and grandchildren.
- June lost her husband five years ago. The two of them had retired to a smaller home in Florida, in which they spent many enjoyable years before her husband’s passing. June has two sons living in the Midwest, in homes with extra space. June sold her Florida home and now alternates living in the extra bedrooms of her sons’ homes. She is super-easy to get along with and poses the boys no trouble. June recently paid cash for a small, newer, reliable SUV she uses to get around town. She has reinvested the proceeds from the sale of her prior home and these funds continue to compound. Every year, she takes the boys and their wives on a vacation trip, for which she pays. Her life is inexpensive, low-stress, and spent in the company of people she deeply loves. To top it off, every year, her wealth and future legacy continue to grow.
Questions or comments?
I can be reached at this link – contact Ted Stevenot.