Chicago Retirement Planning: Should You Rent or Buy?

As a financial adviser in the Windy City, I’ve had countless conversations with folks nearing retirement who want to live in Chicago, and one question pops up time and again: “Should I rent or buy?”

It’s a big decision. You see, this isn’t just about choosing between signing a lease or a mortgage. It’s a decision that sits right at the heart of your retirement plans. Why? Because whether you rent or buy affects not just your wallet but also your lifestyle, your peace of mind and, let’s be honest, your freedom to enjoy those well-earned retirement years.

It’s the kind of decision we guide clients through as part of Advance Capital Management’s personalized retirement planning services explained here. So, believe me, I know it’s not just about the numbers.

And guess what? Chicago ranks as one of the top 60 best places to retire, according to U.S. News & World Report. That’s something to brag about! We have a unique blend of urban charm, cultural richness and that Midwestern friendliness – who wouldn’t want to stick around?

But in Chicago, with its beautiful neighborhoods, lively culture and, yes, those infamous property taxes, the rent-or-buy dilemma gets tricky. So, let’s dive in and explore what this choice means for your retirement journey. I promise to keep it light, insightful and as breezy as a Chicago spring day (which, as we all know, can be quite unpredictable!).

Understanding the Chicago housing market

Retiring in Chicago, your experience will largely be shaped by where you are in the city. The housing market here is dynamic and diverse. In some neighborhoods, property values are on the rise, while others offer more affordable options.

Median home price in Chicago: $319,458 as of 2022, sitting below the national average.

Renting in Chicago also presents a wide range of choices. You’ll find everything from budget-friendly apartments to upscale high-rises.

Median monthly rent: $1,209.

This variety caters to different lifestyles and budgets, but it’s important to factor in Chicago’s property taxes, which are among the highest in the country.

The housing supply is as diverse as the city itself, from the energy of the Loop to the tranquility of Lincoln Park. Each neighborhood offers its own unique living experience and price point. This diversity adds layers to the rent vs. buy decision, making it essential to consider how your housing choice aligns with your lifestyle preferences and financial situation.

Pros of buying in retirement in Chicago

Buying a home in retirement can be a significant investment with several advantages:

• Long-Term Investment & Potential Appreciation: Over time, your property in Chicago could increase in value, providing a financial cushion for the future.
• Stability & Predictability: With homeownership, you're not at the mercy of rent hikes. A fixed mortgage can mean predictable monthly expenses, easing budget planning.
• Potential Tax Advantages: Homeownership may offer tax benefits, such as deductions on property taxes and mortgage interest.
• Flexibility to Renovate: One of the great perks of owning your home is the freedom to modify it as your needs change with age. Whether it's installing grab bars in the bathroom or a ramp at the entrance, you have the liberty to make your home as comfortable and accessible as needed, ensuring it evolves with you through your retirement years.

Owning a home in retirement offers a combination of financial benefits and the personal freedom to make your space truly your own.

Cons of buying in retirement in Chicago

But, just like a Chicago winter, buying a home in retirement can have its chilly aspects too. Here’s the other side of the coin:

• Upfront Costs: There’s the down payment, closing costs and other fees that can take a big slice out of your savings. It’s a hefty upfront investment.
• Ongoing Maintenance and Repairs: Owning a home means you’re the captain of the ship when it comes to repairs and upkeep. From fixing leaky faucets to shoveling snow, these costs (and efforts) can add up. It’s like having a year-round commitment to your property.
• Less Flexibility: Buying a home ties you down to a location. Decided you want to be closer to the grandkids or fancy a change of scenery? Selling a home isn’t as quick and easy as ending a lease.

So, while buying might seem like hitting a home run out of Wrigley Field, it’s important to consider these factors. They could turn your retirement dream home into more of a responsibility than a retreat.

Pros of renting in retirement in Chicago

Renting in retirement offers the freedom to explore different parts of Chicago with less financial strain and responsibility. It’s about enjoying the city’s rhythm without being tied down. Here are the bright sides:

• Flexibility to Move: Want to try a new neighborhood? You can move without the hassle of selling a house.
• No Maintenance Worries: This is the big one. Renting means the landlord handles the repairs and maintenance.
• Potentially Lower Upfront Costs: Unlike buying, renting doesn't require a hefty down payment. You'll likely need just the first month's rent and a security deposit, making it easier on your retirement savings.

Cons of renting in retirement in Chicago

However, renting isn’t always a smooth L ride. Here are some drawbacks:

• Rent Increases: Unlike a fixed-rate mortgage, your rent can increase over time and unpredictably.
• No Equity Building: Renting is convenient, but you’re not investing in your own place. You won’t build equity like you would with home ownership.
• Less Control Over Your Living Space: Renting can sometimes feel like you’re a guest in someone else’s home. You might have limitations on decorating or remodeling, making it harder to make the space truly yours.

While renting offers flexibility and ease, it lacks the long-term financial benefits of home ownership and can feel less stable. It’s about finding the right balance for your retirement lifestyle in Chicago.

Financial considerations for buying or renting in retirement

Navigating retirement in Chicago? It's a bit like planning your route through the Loop during rush hour – you need to be strategic. Here’s how renting or buying can impact your financial plan:

Cash flow

Managing your cash flow is crucial. Buying a home typically means a stable mortgage but also includes maintenance costs. Renting, on the other hand, offers predictability, though you should be prepared for possible rent increases. And, unlike a mortgage, you never pay it off. The goal is to balance your monthly expenses to maintain a steady financial flow.

Assets

Buying a home can be a substantial long-term investment. Over time, it can appreciate in value, potentially becoming a significant source of capital. This asset can play a critical role in your overall financial strategy, offering options for future capital gains or even a source of equity to tap into if needed.

Emergency fund

Regardless of whether you own or rent, maintaining an emergency fund is vital for unexpected expenses. Homeowners need to be prepared for home repairs, while renters should have a buffer for rent increases or relocation costs.

Additionally, it's important to factor in your retirement income sources, like pensions, Social Security and personal savings. Ensuring a balanced and comprehensive income stream will contribute to a more secure and enjoyable retirement.

Lifestyle considerations in Chicago retirement planning

Choosing between renting and buying in retirement isn't just about the financials – it’s deeply about your lifestyle, especially in a city as vibrant as Chicago. Here’s how your personal preferences play a role:

• Proximity to Amenities: Dream of living near Chicago’s theaters, museums and culinary hotspots? Renting might offer flexible options to stay in the heart of the city. But if a quiet, residential vibe is more your scene, buying might be the way to go.
• Access to Healthcare: Let’s not forget healthcare – a biggie for retirees. Chicago boasts top-notch medical facilities like Northwestern Memorial and Rush. Whether you rent or buy, consider how easily you can access these healthcare facilities. It’s about ensuring peace of mind, knowing world-class care is just around the corner.
• Community and Social Life: Yearning for a close-knit community feel? Some neighborhoods, often found in homeowner areas, offer just that.
• Flexibility vs. Stability: Mulling over winter getaways versus a stable, long-term home? Renting offers the freedom to roam, while buying gives a permanent sense of place.
• Personal Space and Privacy Needs: Craving a backyard garden or a personal workshop? Buying often provides more space. However, prime renting locations might mean smaller living spaces but with the city’s pulse at your doorstep.

Bottom line

Your retirement lifestyle in Chicago should fit like a glove – be it the flexibility and urban access of renting or the stability and space of home ownership. There’s no one-size-fits-all answer. Whether you choose the bustling streets of Downtown for renting or a serene suburb for buying, it’s all about what makes your retirement years shine.

Need a helping hand to navigate these decisions? That’s where a local Chicago financial adviser comes in. Schedule a free consultation with an Advance Capital Management adviser today. Whether it’s understanding the nuances of the Chicago housing market or balancing your finances for your desired retirement life, we’re here to guide you every step of the way.