Retirement Reboot: Upsides of Downsizing to a Rental Home

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In retirement, you don't necessarily need a house with several bedrooms and a big yard. In fact, stairs to climb and a yard that needs mowing can become a significant liability as you age. Renters get to outsource emergency repairs and some home maintenance chores, which can make life easier as a retiree. Downsizing to a smaller apartment can also improve your retirement finances. Here are 10 reasons to become a renter in retirement.

Tap your home equity. When you sell your home and become a renter, you can add that home equity to your nest egg, which could significantly improve your retirement finances. "Selling the home and renting gives you capital that is able to produce and earn income," says Neal Van Zutphen, a certified financial planner and president of Intrinsic Wealth Counsel in Mesa, Ariz. "It costs less to rent than it does to own. There's no maintenance costs, there's no property taxes and sometimes utilities are included."

Downsize to a smaller place. Once your children move out of the house, you don't need as much space or stuff. "Downsizing to a living space more appropriate for current needs can be additionally helpful if moving from a multi-story to single-story home, i.e., eliminating stairs," says Andrew Carle, founding director of George Mason University's Senior Housing Administration.

Lower your cost of living. Retirees no longer need to live in expensive areas near the office or in good school districts. Sometimes moving even a short distance can result in a drastically lower cost of living.

Outsource home maintenance. In many rental agreements, it is the landlord's responsibility to maintain the property, including the lawn, exterior of the building and many of the appliances. You are "shifting the burden of home maintenance and repair to the landlord," Carle says. "This includes interior, but also exterior things like lawn maintenance and snow removal."

One phone call for repairs. When something breaks, you don't have to spend your day finding a person to conduct the repair or getting price estimates. You simply call the landlord or administration office and put in a maintenance request. "A lot goes wrong with older homes and that's why a lot of people want to relocate," says Debra Drelich, a geriatric care manager and founder of New York Elder Care Consultants. "You don't have to deal with it when things break –- you just call the super."

Live near the amenities you use. Some retirees choose to relocate to a walkable location near stores, parks and recreational opportunities. "You can walk to things like shops or the theater," Drelich says. It can be useful to base yourself near public transportation in case you reach a point when you no longer want to drive.

Relocate near family. Retirement can be an opportunity to move closer to your children and grandchildren. "If you rent close to your family or children or grandchildren, you have less travel expenses to see family," Van Zutphen says. You can also help each other with childcare and eldercare as needed.

More flexibility. Renting gives you the flexibility to experience a new location or lifestyle without a long-term commitment. "Renting gives you an opportunity to try out a place and see what a place is really like to live in," Van Zutphen says. "Rather than buying right away, you can rent for a full year and see if you can imagine yourself living in Florida or Arizona."

Find age-appropriate features. Retirees can select apartments with amenities that will allow them to live independently for as long as possible. Features to look for include apartments with a minimum amount o stairs, convenient laundry facilities and handles in the shower. "I live in this 95-year-old house with many flights of steps, and this is not the house I am going to be able to grow older in with all the steps," Drelich says.

Extra help is sometimes available. Some senior housing arrangements allow you to live independently for as long as you are able to, and then offer increasing levels of services as you need them. "For those who are getting older, there's independent living, and then when you need it, there is assisted living and nursing homes and long-term care," Van Zutphen says. Many senior communities also offer the added bonus of social activities for residents and a chance to make friends.

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Best States for Retirement
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Retirement Reboot: Upsides of Downsizing to a Rental Home

With a low personal income tax rate that tops out at 4.54 percent, and exempt Social Security benefits, Arizona is a great place to retire, according to Kiplinger's.

Homeowners age 70 and up can apply to defer their property taxes if they meet certain residency requirements. That's extra money that can go toward hiking equipment.

This two-bedroom end unit townhome on a corner lot in Prescott features a great room with fireplace, a kitchen with pass-thru to the dining area. There is two car garage and a bonus side-entry golf-cart garage. It's priced at $249.900.

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With no state or local sales tax, Delaware can be a haven for retirees. Taxpayers age 60 and older can exclude $12,500 of investment and qualified pension income from state income taxes, reports Kiplinger. Whereas older homeowners may qualify for a property tax credit, up to $500.

Located close to the beach, this 1,350-square-foot condo with garage is in a gated community in Rehoboth Beach. The home, listed at $334,900, has access to a bike path into town for dining and shopping and the boardwalk. The community features a pool with wading area and a hot tub.

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There's no inheritance tax or state tax in Florida and retirement income is not taxed. Some 65 and older long-time residents of certain Florida cities and counties can receive an extra homestead exemption up to $50,000 and/or an exemption equal to the assessed value of the property, as long as the real estate has a fair market value of less than $250,000, reports Kiplinger's.

Walton Beach is a perfect place to retire. This luxury Gulfside condo with two bedrooms plus a bunk room comes furnished and is listed at $335,000. The Destin West community has a heated swimming pool, a "lazy river" pool, and large heated hot tub. There is also an elevator assisted sky bridge. The listing boasts that it is "seaside luxury with a toes in the sand location."

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Up to $35,000 of most types of retirement income, as well as social security income, are exempt from taxes in Georgia, unless you're older than 65, in which case the 2013 exemption is $65,000 per taxpayer, reports Kiplinger's.

This rustic lodge-style townhome in Peachtree City, priced at $169,900 boasts a "panaromic view of the lake and babbling creek." The master bedroom has sliding door access to a private deck, where you can get one of the best views of the fireworks in Peachtree City.

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Social Security, military, civil-service, and state and local government pensions are exempt from Louisiana's state income taxes. People 65 or older may exclude up to $6,000 of annual retirement income from their taxable income, reports Kiplinger's. Homeowners who are 65 or older with an adjusted gross income of less than $65,891 in 2013 can benefit from freezing the assessed value of their homestead for as long as the applicant owns and resides in the home.  

This three-bedroom townhome in Shreveport sits right on the lake. Built in 1987, it has floor-to-ceilings windows with amazing views. Jessica Simpson, Nicholas Cage, and Ed Harris are just some of the celebrities who reportedly have stayed in this lakefront home, listed at $369,000.

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Mississippi is home to some of the lowest property taxes in the nation, according to Kiplinger's. Residential property is taxed at 10 percent of its assessed value, and seniors qualify for a homestead exemption on the first $75,000 of value. Also, prescription drugs, residential utilities, motor fuel, and health care services are tax-exempt. In addition, qualified retirement income is exempt from state income tax.

This two-bedroom, two-bath home listed at $135,000 sits on its own 4.9-acre retreat in the town of Picayune, which is one of 20 "Certified Retirement Cities." To qualify, the town had to pass through a three-month screening process.

Picayune is surrounded by lakes, ponds, rivers and woodlands. New Orleans is just 40 miles away and saltwater fishing in the Gulf of Mexico is less than an hour's drive.

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Although there are no property tax breaks for seniors in Nevada, the good news is that there's no state income tax, no inheritance tax and no estate tax.

With a master suite on the main level, a walk-in closet, and vaulted ceilings, this 1,278-square-foot townhome -- priced at $125,000 -- in Carson City also has a laundry area and office space inside the garage. 

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For homeowners 65 and older who were legal residents for at least a full 12 months of the tax year, South Carolina's homestead exemption allows the first $50,000 of a property's fair market value to be exempt from local property taxes, reports Kiplinger. Senior homeowners are also exempt from school taxes on their properties.

This 2002-built condo on Golfview Lane in Summerville is on the 10th Fairway of the Legend Golf Course. With a screened porch and crown molding, the listing says this unit has only been occupied about six months of the year since it was purchased by the last owners. It's listed at $139,000.

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Wyoming, one of the least populous states, has no state income tax. Prescription medications are also not taxed, nor is retirement income and social security benefits, according to Kiplinger's

With fewer than 600,000 residents, Wyoming is perfect for the active adults over age 55 who love the outdoors. There's skiing, hiking, river sports and, of course, Yellowstone. And when you feel the urge to be a part of a larger metro-area, Denver is only 100 miles away from Cheyenne.

This 2013-built twin home in Cheyenne has a main floor master bed room with walk-in shower and walk-in closet. There's an upstairs loft and the dining area and open-concept kitchen is large enough for entertaining. It's listed at $235,000.

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