How to Save Money With a Roommate in Retirement

How to Save Money With a Roommate in Retirement

Retirees consistently cite three big fears: fear of loneliness, fear of financial ruin, and fear of health issues. One simple strategy can help allay all three fears. Consider getting a roommate. Roommates can help you save money, offer companionship, and can intervene if you have a health emergency. Here’s how a roommate can help you—and how to manage the relationship.

Why You Should Consider a Roommate

The home is the biggest asset of most seniors. It’s something to sell in a financial emergency, not to mention an asset that tends to accumulate value with time. What’s more, if you’re over the age of 62 and own your home, you can seek a reverse mortgage if you get into financial trouble. This loan, which doesn’t have to be repaid as long as you follow its terms and remain in your home, can ease the minds of seniors with financial worries.

But affording your home becomes more challenging with time. The expense of upkeep and the time demands of maintaining a home can become more onerous with age—particularly if you can’t justify having a large house anymore.

A roommate reduces the expense of living in your home. Depending on the arrangement, you might even be able to eliminate your mortgage payment with the additional money brought in by a roommate. You can even draw up a roommate agreement that requires your roommate to assist with some household upkeep.

Your roommate isn’t a surrogate spouse or friend, but they can offer some companionship if you get along well. Consider another senior, or invite a young person who shares your interests. Someone entering the field you spent your life in, for example, might welcome a relationship with a mentor.

Expenses and Savings With a Roommate

Before you jump on the roommate bandwagon, make sure you know what you’re getting. You’ll be acting as a landlord, and that means you have to provide a livable, safe space. Maintaining the shared space and addressing repairs in a timely fashion can cut into your earnings with a roommate, so budget accordingly. Before committing to a roommate, take stock of:

  • How much the living space is actually worth. What do similar rooms in your area go for? Entirely separate living spaces, such as basement apartments or in-law suites, typically command the highest rates.
  • Whether any repairs are necessary to make the space livable and attractive.
  • The cost of any recurring repairs or improvements. For instance, you might need to pay a lawn service.

Managing the Roommate Relationship

Though a roommate can feel like a friend, you’ll have to remember that you’re still a landlord. Some tips for making it work include:

  • Draw up a detailed contract that outlines both sides’ obligations and expectations. Then talk about the contract to ensure everything in it is clear.
  • Respect your roommate’s boundaries and privacy. You might become friends, but a roommate is under no obligation to be your friend.
  • Do a background check on your roommate, and call references to ensure he or she is a safe person to live with.
  • Promptly make repairs on your home.
  • Consult with a lawyer about your legal obligations to maintain the space, how much notice you have to give if the roommate must move out, and similar issues.