Today, I’m going to address the question: “Where will you live when you retire?” It’s not an easy question to answer.
First, you must determine if you have enough savings to retire. After that, you have to decide when you want to retire and where you want to live. Have you had a conversation about that with your significant other or spouse? Many people haven’t.
When working on financial plans, I often encounter couples that haven’t even had the discussion themselves. They also don’t know where they might want to go and ask me for some help. I know my wife and I have had some discussions about the topic already. We’re not ready to retire any time soon. But the sooner you start to think about where you might want to live in retirement, the better off you will be. That gives you time to explore and make sure it’s a good place for you.
When thinking about where we want to retire, we often want to find our dream location. Honestly, you’re probably not going to find one. There’s not going to be any perfect place. Instead, we have to pick and choose what is most important to us. We also have to prioritize.
Let’s discuss the options. One option, which we often don’t think about, is staying where we are. Do we need to move at all? Maybe not. Why must we move?
- Our current home might be affordable.
- It’s where our family and friends are.
- Hopefully, there are activities that you enjoy that are close by.
- As you approach retirement, you may even be mortgage-free.
Those could all be good reasons to stay where you are. But if you’re looking to cut costs, then you start to have a real incentive to move. Maybe you want to downsize and take some profits out of your current home. You might want to lower the cost of your utilities. You might want to lower your repair and maintenance costs by moving into something newer. You may prefer a community where things are taken care of for you. That way you no longer have to worry about doing many things yourself.
There are other things to think about: You might like where you live now and prefer to stay there. You could take more frequent, and possibly brief, vacations. You might also consider purchasing an inexpensive weekend getaway place. Can you try living someplace else on a part-time basis? That might be a good move, too.
If you decide that moving is the right thing for you, there are many things to think about:
1. What is your cost of living?
· Some states are cheaper than others. States such as Mississippi, Oklahoma, Arkansas, Missouri, and Tennessee have a lower cost of living. On the more expensive side, you have Hawaii, California, Massachusetts, and Oregon.
2. What is the average cost of a home?
· If you’re looking for low housing costs, consider places like West Virginia, Mississippi, Arkansas, Oklahoma, and Indiana.
· Hawaii, California, Massachusetts, and Oregon are on the more expensive side.
3. Next, you might want to think about taxes. But remember. You don’t want to make decisions based only on taxes. Focus on life planning and quality of life. If you don’t like where you settle, and you moved there because you wanted to save taxes, you’re probably not going to be happy there.
· When it comes to state income taxes, four states exempt all or most of your retirement income from tax. Those states are Hawaii, Illinois, Mississippi, and Pennsylvania. Another 27 states exempt some, but not all retirement income. Ohio, Oregon, and Utah provide a tax credit for retirement-type income. There are also states that only tax your dividend and interest income. New Hampshire and Tennessee are two examples. There are also seven states where you pay no state income taxes. Those would be Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
· Importantly, the tax-exempt states as well as those that don’t make you pay taxes on your retirement income, are spread across the country. You’re not stuck to one geographic area.
· Florida has a warm climate and its residents don’t pay state income tax. That is one of the reasons that so many people retire there.
4. The next thing you want to think about is what type of amenities are available, and how vibrant is the economy? Why does that matter? What if times get a little bit tough, or you have some extra time on your hands and would like to raise a little bit of extra money? You’d like to be able to find work if your financial or personal situation changes.
5. What is the climate like? Many retirees prefer mild weather. They don’t like the cold.
6. Retirees often prefer a place with a low crime rate.
7. Readily available internet access. I know that doesn’t sound like it matters that much, but it could. Why? You don’t want to be too isolated. Having strong internet connectivity allows you to be more connected. It can help keep you from feeling isolated. Something we’ve all become a little more accustomed to during the pandemic.
8. You also want to have quality hospitals and assisted living facilities available. Having quality medical care available can make a big difference.
9. You also want to make sure that the activities and services you prefer are accessible. Are there such things as fitness centers, golf courses, and ski resorts? Are there hiking or biking trails if you like to cycle or walk? Also, are there activities that attract newcomers like arts and retail venues, public libraries, and civic organizations? If theater is something that interests you, is that available where you want to move? You also want to make sure that the natural environment is strong, including recreational land and historical landmarks.
10. You might also want to consider living in a college area. Why college towns? Many of them have good access to top-notch university hospitals. That gives you good medical care, access to public transport, and stronger rental markets. If the idea appeals to you, you might even think about buying a place near a college town and using it as a rental property. That can help you earn some extra income. Then when you’re ready to retire, the rental property could become your retirement home. Of course, you might have to fix it up some first. But that might not be a bad way to buy your home at an earlier date.
If you’re having trouble deciding, there are some things you can do, especially if you have a lot of time until retirement. Go check some places out on vacation. See what you think. Then take your top choices, and when you have the time, spend more time visiting them. Go out and about in neighborhoods, talk to a realtor and find out what home prices are like. Learn a little bit more about the community and see what’s best for you.
To sum it up, here are some questions to think about:
- When you retire, what do you want to do? What activities are important to you?
- Depending on where you want to move, are virtual calls going to let you be close enough to your children and grandchildren? Will you be able to see them often enough? Don’t forget your friends who will no longer be in the area, too.
- Are you open to renting, or do you only want to buy?
- Will you be able to get good medical care? Will the doctors accept Medicare?
- How accessible are creature comforts like getting an ice cream cone or going out for a meal? As you age, will there be ways to get out, if you can’t do so on your own?
- As you age, what happens if you need to change a light bulb or some routine maintenance needs to be done? When we first retire, we can probably handle those things ourselves. But as we age, we may need help. It could be nice to be in a community where there are people you can call on to assist you. You may not want to take care of the landscaping or hire others to do it. Those responsible for maintenance in your development may be able to help you, too.
- Who are you going to have lunch with? Sure, you want to spend time with your spouse, but you want to spend time with other people, too. Are there chances for you to have other friends and people you can go out with and spend time with so you’re not feeling too isolated?
- How busy is the place going to get? We know what it’s like today. Remember, you’re planning to live there for the rest of your life – 15, 20, or even 30 years or even more depending on your lifespan. What are your thoughts about how that area is going to change over time? Is it going to become too busy or too big for you, or do you think it’s going to be about right?
Finally, don’t forget to revisit that first question, “What’s wrong with where you live now?”
I hope you found this information helpful. Thanks for listening and have a great day.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.