by KYW's Salil Gutt
Many seniors continue to downsize and move to warmer climates. The conventional wisdom is to buy real estate but there is a case to be made for renting rather than buying retirement real estate.
The current real estate climate reinforces the rental route. Here's how the math would work.
There is a capital gains exemption when one sells a primary residence. This is $500,000 for a couple, $250,000 for singles. The end result is that one will keep a great chunk, if not all, of the proceeds of the sale of a house.
Invest the proceeds in a blend of CD's and bonds. It is possible to average out an income stream around 4.25%. This income can be used to pay the rent. Housing expenses tend to be the largest budget item for retirees. Rentals also eliminates the need for big ticket home repair expenses. All in all a lot more financial flexibility.
Finally, the rental can be a stop gap solution if one is contemplating eventually moving to a continuing care retirement facility. You now have the funds to pay for the lump sum payments most facilities require.
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