I’m 60, planning to retire in 5 years with about $6,000/month. Is buying my first home now a smart move for my finances and retirement?

They lived in his house with his children from a previous marriage, and he willed the house to his children, making Susan effectively their tenant. She loves her blended family, but she wants a house of her own to retire in.

Susan wants to buy a house of her own, but isn’t sure if that’s a great idea so close to retirement. We crunch the numbers for this scenario, plus look at whether the market is right for late-in-life homebuyers right now.

What should she do?

Susan’s financial situation is strong but not unlimited. She calculates that her pension payments will be about $3,750 per month, and her Social Security payment should be $2,158.00.

Her late husband’s $750,000 in retirement accounts provides a solid foundation, but that money must sustain her for 20 to 30 years.

Assuming moderate growth and a conservative 4% withdrawal rate, those funds would generate roughly $30,000 annually — about $2,500 per month — before taxes.

Combined with her pension and Social Security, she could expect to live on around $8,400 a month, which is comfortable but not cushy, particularly as health and home maintenance costs rise over time.

Buying a home now could offer stability and emotional satisfaction, but it would also tie up a significant portion of her liquid assets.

If she purchased a home around the national median of $435,000 and made a 20% down payment, she’d spend about $87,000 upfront and take on a $348,000 mortgage.

At current rates (at the time of this writing) near 6.7%, her monthly payment would be roughly $2,300 before taxes, insurance, and maintenance.

Once taxes, homeowners insurance, and maintenance are added in, her total monthly housing costs could approach $3,000.

That figure would absorb over a third of her expected $8,400 monthly retirement income, a ratio that is on the border of the recommended limit. Even a modest rise in property taxes, insurance premiums, or repair needs could strain her fixed income.

What’s more, she has to factor in unexpected expenses and money for enjoying her golden years. At 60, with just five years left in her career, Susan’s priority should be to protect her liquidity and keep monthly obligations low.

The smartest move for her would be to delay buying a home, or to consider purchasing a smaller property like a condo that she could put a significant down payment on.

Alternatively, she could continue renting and invest more of her earnings into savings, maintaining her cash flow and keeping her options open until her pension and Social Security payments begin.

The advantages of renting vs. owning

On the other hand, we don’t know if Susan’s current situation, where she may be living rent free or for reduced rent, will change in the near future. Often, informal financial arrangements between family members can get complicated quickly. If her adopted children decide they want to raise her rent or sell the house, she might be forced to make a choice before she’s ready.

Renting in the suburbs of Cleveland is relatively affordable today. Recent listings data put average rents around $1,232 in University Heights and about $1,197 in Shaker Heights (which is well below national average levels) and leaves more room in Susan’s budget than a new mortgage would (1).

Given Susan’s five-year runway to retirement and the importance of liquidity, a year or two of renting in University Heights or Shaker Heights could be a smart bridge.