When you think about your retirement, you may have a vision of where you want to live and what you want to do. But one of the biggest, if not the biggest, factors is; of The biggest issue is your financial situation that will influence that decision.
Projecting your future living costs is important no matter where you live, but if you’re planning a retirement move, pay close attention to some of the hidden costs of moving to a new location. need to pay.
There are many different ideas about the best place to retire, but it’s important to base your decision on your specific goals and what you can afford. To help you with your research, take a look at this list of financial considerations when choosing the best place to retire.
Important points
- Your financial situation plays a big role in determining the best place to move to after retirement.
- When considering where to move, look into the cost of living, tax obligations, housing costs, and access to health care in the city or state you’re considering.
- Other factors such as proximity to family, climate and lifestyle choices can also impact your household finances and should be taken into account when calculating your retirement figures.
Financial considerations to consider
Working with a financial planner can help you estimate how much your expenses will be and how much income and savings you’ll have available for retirement. However, if you are considering moving when you retire, additional calculations will be required. You may decide to sell your home and buy or rent a new one. Needless to say, your expenses can vary greatly depending on where you go.
Here are some key financial factors to consider.
Cost of living
Eric Mangold, a financial planner in Westfield, N.J., and founder of Argosy Wealth Management, says that if you live on a fixed budget, small increases in expenses can have a big impact on your retirement lifestyle. He says he will give. He knows how much it costs to live wherever he goes. He suggests giving it a try, even if it means renting an Airbnb for a few days and checking out local supermarkets and other services to get an idea of average costs in your new area.
Then ask yourself how the cost of your regular grocery list compares to what you’re paying in your current hometown. What are gas prices? Check out the restaurants, movies, and other places you frequent in your new location.
As recent years have shown, the cost of living becomes an even bigger factor during periods of inflation. Ideally, try to choose a location with a similar or lower cost of living.
Housing expense
According to the Employee Benefit Research Institute’s (EBRI) Retirement Spending Survey, nearly one-third of retirees’ monthly income goes toward housing costs. Therefore, when buying a home in a new location, you need to consider how much the home will cost. This may include rent or mortgage, maintenance costs, homeowners association (HOA) fees, and property taxes.
The good news is that Fidelity’s Retirement Spending Study shows that average housing costs for retirees tend to decline over time, from just over $23,000 per year at age 55 to 65. That means about $18,000 by age 75, and just under $16,000 by age 75. Of course, this is because people are downsizing or moving strategically to cheaper areas, and if you’re looking to cut spending, that should be your end goal.
On the other hand, if you’re moving, you’ll need to consider property taxes, as costs can vary greatly depending on where you live and where you’re moving. “Some states are scary places to retire,” Mangold said. “We have clients who have lived in New Jersey all their lives, moved to North Carolina and paid property taxes from $15,000 to $1,100.”
Another item to research is maintenance fees or HOA fees if you’re moving into a community development or condominium. Make sure you understand what is included and what amenities will cost extra.
access to healthcare
As you get older, housing costs tend to decrease, but medical costs are expected to increase. At age 65, households will incur an average of $67,000 in out-of-pocket medical expenses for the rest of their lives, according to a study by the Boston University Retirement Research Center.
Where you move after retirement can impact your health care costs. For example, if you have a condition that requires highly specialized treatment, will you be able to find the treatment you need in your new location, or will you need to fly back to see your current doctor?
You should consider not only the quality and availability of the specific care you need, but also how far away you are from medical facilities such as urgent care, hospitals, and your primary care physician.
tax
One of the big economic factors when relocating for retirement is how tax-friendly a state is. Currently, a handful of states have no income tax, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Additionally, if you plan to receive a pension in retirement, you should research whether the state you’re moving to is a “pension-friendly” state, meaning it doesn’t tax pension income.
Taxes should be high on the list of financial factors to consider, said Mark Charnett, founder and CEO of American Prosperity Group in Sparta, New Jersey. The lower the tax costs in a new area, the more cash flow will be put back in your pocket.” In a perfect situation, if you wanted to save a lot of money, you would choose a state with no income tax and low property taxes.
How moving after retirement affects your plans
In addition to things like changes in housing costs and taxes, you should consider how the move will affect your family structure, lifestyle, and ultimately your budget as part of your decision. Things to consider:
distance from family
Where do you spend your holidays? Do you visit your children or grandchildren several times a year? If so, you should consider the cost and feasibility of the trip. In addition to airfare (if required), you’ll also need to consider where you’ll stay once you arrive. If you need a hotel or rental car each time, the costs add up quickly, Charnett says.
Another concern is whether you can afford to hire a home health aide if your health is not very good, or if you get sick later and your loved one is too far away to help care for you. That’s it. Many retirees end up having to return for this reason, Mangold said.
Lifestyle
Thinking about the kind of lifestyle you want to live and the cost of maintaining it is one of the most important considerations when choosing a retirement destination. Charnett says you need to make sure you’re getting close to the activities you enjoy doing and estimate the cost of continuing to do them.
For example, if you like walking or cycling, you might choose a “walkable” city or a location with access to many nature trails. If you like to play pickleball or swim in the pool, are those amenities available on-site in your community? How much does golf cost at nearby courses?
According to Fidelity’s 2022 Retirement Spending Study, people planning an active lifestyle in retirement should expect their budgets to increase by 6 percentage points compared to less active seniors. It is said that
Aging in place
If you move when you retire, chances are you’ll be living there for the rest of your life. If that’s your plan, it’s a good idea to make sure your home has “age-appropriate” features to accommodate any physical limitations that may arise in the future. For example, is everything on one level? Is there a walk-in shower?
Charnett, who is semi-retired herself, said she designed her home with the intention of living there for the rest of her life. “If you can’t afford a long-term care facility, you can plan ahead to build certain features within your home,” he says.
employment opportunities
Sure, you’re retired and may not want to think about the job market. But what if you’re bored and want to start a part-time job or a consulting job? Maybe you think you can use some extra income to fund your new hobby. Or maybe you want to continue volunteering in a new location.
“There’s bound to be job opportunities wherever you’re going,” Charnett says. Even if it just means saying hello at Walmart or offering your time at your local food bank. “The psychological impact is very important.”
climate
Not only do you want to move to a place that suits your climate preferences, but you also need to consider the financial implications of doing so. For example, many popular retirement regions are also susceptible to hurricanes (such as Florida and the Carolinas) and record heat (such as Arizona).
“We have a customer in North Carolina who spent extra money on hurricane shutters. We also have another customer in Fort North Carolina. In the Myers, Florida area, flood insurance increased from $1,300 to $3,300 this year. We just got it,” Mangold said.
If you’re moving to an area with risk of wildfires, storms, or flooding, you’ll need to set aside additional funds to cover the additional protection you need for insurance and fortifying your home.
Start an online comparative study at a website called RiskFactor.com. This website collects location-based data about fire, flood, and wind risks.
leave the usa
If you can’t afford to retire in the most expensive state and have no interest in lower-cost areas, you may decide that retiring to another country is more cost-effective. It’s not for everyone, of course, but if your family has ties to other countries, or if you really enjoy a particular place you’ve visited before, it might be worth considering. Please note that each country has its own rules and regulations for retirees coming from other countries.
conclusion
Retirement is an exciting transition to the next chapter of your life. However, it’s important to consider the big-picture economic implications of your location choices. Where you move can have a big impact on your overall costs in ways you might not expect.
If you have time until retirement, prepare as much financially as possible before you start looking for a new home. The bigger your nest egg, the more options you have. Before you start packing, work with a financial planner to figure out what you can afford to spend each month. This will allow you to make informed choices about where to retire.
