When times feel uncertain — especially during retirement — it can be tempting to lock in a sense of security. For one couple, that meant wondering if they should prepay their rent for the next two to three years using a work bonus. But financial expert Suze Orman says this move could cause more problems than it solves.
The Question: Is Prepaying Rent a Smart Move?
On a recent episode of the "Women & Money" podcast, Orman and her partner, KT, read a question from a listener named Linda. Linda and her wife, both recently retired at ages 73 and 70, asked whether they should use a recent bonus to pay several years of rent in advance. The couple already had $600,000 in a diversified investment portfolio and hoped to avoid drawing from it until 2028.
Orman's answer? A firm no.
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Why Paying Rent in Advance Can Be Risky
"Rent is the keyword here," KT said quickly after reading the question. Orman agreed — and for what she called "a whole lot of reasons."
One of the biggest concerns is that prepaying rent doesn't give you anything in return — it's not building equity like a mortgage would, and it doesn't improve the value of an asset. It's simply money spent, upfront, for a place you don't own. That can become a problem if your circumstances change.
Orman isn't against renting itself. In fact, she's recommended it in certain situations. But handing over two or three years of rent in advance during retirement raises red flags. Here's why:
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- Life changes happen. Anything could happen to you or your partner over the next few years. If you pay now and plans change — due to health, relocation, or other circumstances — you might not be able to get your money back.
- Landlords can change too. "Who is she paying rent to?" Orman asked. "The landlord." Landlords can sell, pass away, or change the terms of a lease. That could complicate things — especially if rent payments were made years in advance.
- The money could work harder elsewhere. Instead of locking it away in rent, Orman suggests keeping it in a safe, interest-earning account like a money market fund. That way, it's still accessible if needed and earning something in the meantime.
A Better Approach for Retirees
Retirees looking to delay drawing down investment income may benefit more by keeping bonus funds liquid. Orman pointed out that even in volatile markets, there are ways to grow your money conservatively. "Just put it somewhere safe as your rent money, making money market interest rates," she said. "These markets still have a lot to go."
In short, tying up tens of thousands of dollars in prepaid rent isn't just unnecessary — it could limit your financial flexibility during retirement.
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Bottom Line
While paying rent years in advance might seem like a smart way to reduce future stress, Orman says it introduces too many risks. From changes in your own life to uncertainties with landlords, the safer strategy is to keep that money earning interest and available for when you need it.
As Orman put it, "That's such a waste of money — I cannot even tell you."
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