Renting your home in retirement is on the rise… currently 6% of over 65s live in private rented accommodation and this figure is expected to spiral to around 17% by 2040. If this on your agenda, what might this mean for your outgoings?

While homeownership is the preferred route for most people in retirement, there is now a distinct trend for people to rent in retirement.

While for some this is simply a continuation of the fact that they don’t own their own home, for others it’s a distinct life choice… and retirement scheme developers are smoothing this route by focusing on offering accommodation in purpose-built schemes that can include health and leisure facilities.

The attraction here is obvious: you can invest the receipts from your home sale and live in safe, secure accommodation ­– perhaps close to family and friends – designed to let you age in place… with built-in social network on your doorstep and possibly care facilities too.

But there is a cost involved. At the better-appointed retirement schemes and villages, even two-bed apartments (after you have included costs such as service charges) can easily tot up to between £2,000 and £3,500 a month, and possibly much more, depending upon where you choose to retire to.

Of course, you won’t have to pay house moving costs such as stamp duty and solicitors’ fees when you move in, and neither will you or your family face the same charges when you move out. Nor will you have to worry about what happens if the roof starts to leak… that should all come out of your service charge.

All that said, putting enough money aside to generate an annual outgoing of between £30,000 and £40,000 to live in a well-appointed retirement village obviously requires a significant investment, and you can easily work out how much you’d need to put into an annuity, savings account or drawdown pension using your RetireEasy LifePlan.

Renting in the mainstream market

But what if you are lowering your sights somewhat, and are looking to rent in the private rented sector?

Suffolk Building Society has just published some research showing that, with rising rents, you will still be looking at spending a significant amount above home ownership over your retirement years.

Based on a national current average monthly rent of £1,360, a typical retiree could

pend £261,120 on rent over the course of their retirement. But this masks huge differences in rents around the country: in London, where average rents are higher, this rises to £434,880.

The Society’s analysis is based on someone renting from the average UK retirement age of 64 and life expectancy stretching for around 16 years beyond that.

Even downsizing to a smaller property only tweaks the figures slightly: the national average rent for a one-bedroom property is currently £1,103 a month, amounting to £211,776 over the same period.

Again, you can stress-test your financial plans using your RetireEasy LifePlan to run different scenarios to see how long your savings will last at that rate.

Charlotte Grimshaw, head of intermediaries at Suffolk Building Society, said: “Renting has a clear role to play at various stages of life, but given these figures, some may want to explore alternative options.”

The Society also highlights other potential drawbacks, including reduced financial security, weaker security of tenure and limitations on the problem of adapting a home for future mobility needs.

So is home ownership an alternative for today’s older renters?

Suffolk BS argues that the later life lending market has evolved rapidly in recent years, which means many older people currently renting, and concerned about their ability to fund future rent rises, may not be aware of the increased flexibility now being offered by some lenders.

These include criteria that take rental payment histories into account, lenders who set no maximum age limits, and the ability to use pension assets or drawdown funds within the affordability assessments.

Grimshaw added: “There’s understandably a huge focus on first time buyers right now, but given the substantial rental costs retirees may face, it is equally important for this underserved group to be helped.

“Many older renters may have tried to buy a home in the past but found it out of reach. Our message is that the mortgage market has changed significantly in recent years, and it may be worth taking a fresh look.”

How your RetireEasy LifePlan can help ensure you never run out of money in retirement

RetireEasy was established precisely because the founder, Richard Collinson, wanted to know how much money he could safely take from his savings and investments each year during retirement… but found there was no consumer-based program to give him the answers.

After creating the software to provide those answers and turning it into the UK’s most sophisticated consumer retirement finances program available, subscribers can see at a glance precisely how much they can comfortably withdraw in any year in the future.

More than that, they can also run different scenarios to see the impact of variations in the rate of inflation, interest rates, returns and so on… as well as what happens if (for example) they decide to carry on working for longer, downsize, receive an inheritance or help a family member get onto the housing ladder.

If your subscription has lapsed, it costs just a few pounds a month to get it back on track!