We’re planning for retirement but still rent in NYC – can you retire early without owning a home?

A Reddit user is hoping to retire early, but there’s a potential problem.

He lives in a very expensive area, and it makes little sense for him to buy a property where he lives. Since he isn’t going to be able to get rid of his housing payment, he is concerned this ongoing obligation will interfere with his retirement dreams.

So, is it possible to leave work at a young age even if you don’t own your home free and clear?

Owning a home isn’t the right move for everyone

While owning a home can be a great way to grow your net worth, it isn’t the right choice for everyone — and it probably wouldn’t be the best move for the Redditor.

As he explained, he routinely hears from people who have retired early that paying off their mortgage was a key part of their readiness to stop working. However, since he lives in New York City, the math doesn’t work, and it would cost him and his wife far more than the amount they are paying in rent to buy a property similar to the one they are living in now. 

While he said they might potentially move out of the city and purchase a home somewhere after their son graduates and leaves home, he also could easily see the couple staying put in the city once they are empty nesters. Even if they did buy a property, it would not happen for around 16 years minimum until their son heads off to school. 

By the time the poster is potentially ready to leave the city in 16 years, he’d also be at the point when he’s ready to stop working. As a result, he thinks it would be risky to buy at the time. Yet, he also thinks renting into his 70s and 80s is risky as well. So, in his opinion, there’s really no good time for him to buy a house — but not buying one also makes him feel uncomfortable too.

Can you retire early without owning a home?

There’s a pretty obvious reason why many people want to pay off a home before they retire — it drops their housing costs significantly. However, during the process of paying off that home, many people incurred opportunity costs because they spent money they could have invested on paying their mortgage instead. 

The reality is that it is entirely possible to retire without owning a home, provided that the poster is diligently investing and growing his money in other ways. He should specifically make sure to invest all the money that he saves as a result of renting instead of buying. Since he’s not going to eliminate his housing payment, he will need to make sure he can cover that payment and other costs at a safe withdrawal rate.

Homeowners, of course, also still have expenses to cover in retirement, including property taxes, home maintenance costs, and insurance for their homes. The OP won’t have to worry about those costs (except for renter’s insurance), so it’s just a matter of budgeting for different things than homeowners do. As long as he has a nest egg big enough to generate income to cover rent for the rest of his life, it’s no different than relying on your nest egg for all the other things you need to pay for in retirement, like food and healthcare. 

To make sure he is in a good position to retire early and keep paying for his home, the OP should work with a financial advisor. His advisor can help him to estimate ongoing housing expenses and make an investment and spending plan to ensure he can cover those costs easily. That way, he should be able to retire at his chosen age with the peace of mind of knowing his status as a renter won’t hurt his financial security in the end.