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Is apartment living right for your retirement?





When Rita and Craig Christensen decided that it was time to downsize, they didn't sell their single-family home and use the money to buy into a seniors housing facility or purchase a condo. They instead chose to rent in a new apartment development in downtown Wheaton, Illinois, a western suburb of Chicago.

The Christensens, who are about seven years from retiring, don't plan on moving from their apartment unit once they leave the workforce. There are too many things to do in their new neighborhood.

The couple's apartment sits a three-block walk from a train that connects to downtown Chicago. It's across the street from Wheaton's public library. A wine bar is a block away, as are shops and restaurants. There's even a farmers market every Saturday morning that the couple can see as they stand on their balcony.

"We really take advantage of what is going on downtown," Rita Christensen says. "This will be our first summer living here. It really is an ideal location. There's even a miniature-golf course across the street that my grandson likes."

The virtues of apartments for retirees

The Christensens aren't alone. Urban apartment living is a real option for seniors who want to ditch their snow shovels and lawnmowers when they retire and take advantage of all that cities can offer. These retirees may want to be able to walk to the movies, or take public transportation to evening dinners without having to drive busy suburban roads.

Retiring to an apartment does require some financial planning. But retirees -- or near-retirees -- who study their financial situations carefully before swapping their homes for apartments will boost their odds of having a happy retirement in their rentals.

Armando Roman, member of the National CPA Financial Literacy Commission and managing principal of Scottsdale, Arizona-based AXIOM Financial Advisory Group, says that seniors whose homes have appreciated significantly after they bought them can benefit financially by selling these residences and renting an apartment.

"When you can downsize and add that chunk of money to your retirement income portfolio, the lifestyle gets a boost," Roman says. "The upkeep costs on a house and yard never go away. A home always needs something. Selling the home to become a renter could free up enough cash each month to make an impact on the senior's daily quality of life."

A few caveats

Moving to an apartment doesn't make sense for all seniors. Some won't want to spend money each month on apartment rent. If they've paid off their homes, it might make more financial sense for them to remain in those residences, unless the upkeep and maintenance on their larger homes becomes overwhelming.

Roman recommends that seniors add up all the costs of keeping their home, including maintenance, repair, home insurance and property taxes. How do those costs compare with monthly rents? Would they be better off financially by renting?

It's also important for seniors to consider other pros and cons of apartment living. As the Christensens are discovering, freedom from home-maintenance provides plenty of extra time for renters. Renters who live in urban downtown districts can use this freedom -- and the money they've made from selling their homes, minus the dollars they'll need for monthly rent -- to explore the many activities of their busy neighborhoods.

On the negative side, apartments rarely come with yards. Urban apartments, especially, usually come with less space, which could be a negative for seniors hoping to spend more time with their grandchildren. Other seniors might want to pass their homes down to their sons or daughters -- something they obviously can't do if they sell them.

Then there is the issue of rising rental rates. The website Apartment List reported that from 2000 through 2012, apartment rents rose 6 percent, and real estate research firm Reis Inc. reported that first-quarter 2014 rental rates were the highest it has seen since it began collecting the data in 1999.

Rents can be especially high in urban areas. Real estate blog Curbed reported that the average monthly rent for an apartment in Brooklyn stood at $3,209 in April. If you want to rent a two-bedroom apartment in Chicago's Loop, you would have faced a median monthly rent of $2,676 in February, according to Curbed.

Weighing the options

Patrick Bet-David, a financial adviser and president and CEO of Woodland Hills, California-based financial services marketing company PHP, says that while retiring to a rental is not the perfect choice for every senior, there are many who would benefit from such a move.

"If they have a nest egg, whatever the number might be, there is no need to hold onto that single-family home," Bet-David says. "I would absolutely encourage those seniors to sell their homes and take that money to either save or use as an income source."

Bet-David encourages seniors to look at the reasons for why they initially bought a home. For many, the goal is to build equity in a home, sell it and then move into a larger home, a dream home. For baby boomers and retiring seniors though, that is no longer the goal, Bet-David said.

The financial goal now? To guarantee that they won't outlive their savings after retirement. And seniors can use the profits from a home sale to help boost the likelihood of never outliving their savings, especially if they don't sink a majority of these profits into buying into a seniors housing development or purchasing a condo.

"When seniors consider downsizing to become renters, they should add up all those costs of keeping the home and imagine them as extra income in their monthly budget," says Roman. "Would this give them a better lifestyle? Would this allow them to sleep better at night knowing they have more income to live on?"

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