The question, “Where do I want to retire?”, is one of the most basic questions people ask themselves when planning to leave the workforce. Know that your retirement location can drastically change your overall financial plan.
Now, before you settle on a , you need to ask yourself some questions:
- Will you really be happy in a new location? The answer will vary from person to person.
- What are you looking for in terms of medical needs?
- Will relocating to a new place increase your quality of life?
Of course, none of your dream locations will fit in every tiny detail and present a flawless deal. The trick is to check out your options and choose from the most advantageous one from the plenty of charming and comfortable places all over the map.
Factors To Consider Before Picking A Retirement Destination:
1. Consider Retiring Locally
Before you consider other aspects of , you need to ask yourself whether a move is necessary.
is and should be a significant priority in your . And if your current hometown is affordable, close to loved ones, includes your favorite activities, and has the advantage that you are in your own house (mortgage-free home), there’s no reason to move for the sake of moving. In fact, moving in that scenario might actually remove you from the people and things you enjoy.
As a , if you’re only looking to cut costs with a local move, we recommend that you evaluate the following scenario:
Would you be willing to sell your home at a profit?
If yes, we suggest you sell and downsize to reduce your utility bills and repair and maintenance costs.
Now, if you have set aside a good sum as , consider whether your desire to experience something new may be achieved through more frequent vacations, or by purchasing an inexpensive weekend getaway home.
Many a time, a pre- makes the decision to try a new location on a part-time basis. For those who have had a hefty and a good , chances are that you already own a home in another location that you covet. You can choose to live part-time in that location and rent it out during the holiday season to make some money.
Buying a second home during your working years can offer a pre-retirement trial period. Even better, rent the house out in high season and visit regularly in the offseason.
2. Consider the of
When going through your favorite destinations, the of is an important point to consider.
With more free time in your hands, you may go to the movie theater more often, frequent restaurants with friends, or take on new club membership.
Depending on your preferred activities and the frequency, rely on an online retirement calculator to estimate the cost of living of the place. We insist that you go over basic expenses, such as housing costs, gas prices, and grocery bills.
In a nutshell, if you’re planning to move to a new area, you need to check out the businesses you might frequent and compare the with your current location/second preferred destination.
You may be surprised at some of the findings as a place with low taxes can have higher prices on everyday essential goods, or you might discover a city that initially seems pricey because of the , etc, has a reasonably low of .
Of course, the importance of calculating health care costs like skilled nursing, the cost of an assisted living community, independent living community, etc cannot be stressed enough.
You may have coverage through Medicare and apart from your money in the but factor in the costs of over-the-counter medications, therapies that aren’t included in your insurance. The idea is to account for specific services you might need to pay for out of your own pocket for vision care or dentist visits.
3. Consider Taxes in Retirement
As a retiree, you’ll likely get income from Social Security benefits, investment account distributions, and potentially a pension. The point is, you will be living on a fixed income. And the more taxes you pay, the less of your hard-earned retirement funds will be available for you to use to enjoy life.
Property tax and sales tax can also set your retirement savings back by a huge chunk. Note that these tax rates can differ; they are much higher in certain states than in others.
Let’s take a look at the three key aspects of taxation to consider in retirement:
State taxes: Some states do not have personal state income taxes.
Taxes on retirement income: Some states exempt all or most retirement income (such as Social Security benefits) from taxable income. Twenty-seven states tax some, but not all, retirement and pension income. There are few states that provide a tax credit for these types of income.
Taxes on dividend income: New Hampshire and Tennessee only tax dividend and interest income.
Note: A state with lower tax rates in any of the above categories does not necessarily mean that it is cheaper to live there. It depends on other taxes that apply.
For example, choosing an area with a smaller tax break but a lower cost of living or lower property taxes may actually save you money.
Of course, we know that low taxes cannot be the sole contributor to a happy retired life! Focus on life planning over tax planning.
Again, affordable retirement planning does not revolve solely around taxes either. Depending on other financial data points of the location, low taxes may not save you much money.
4. Consider the Availability of Healthcare Services
Moving to retire is not just about the tax rate, real estate costs, etc; in your old age, you don’t want to find yourself in an area with few specialists or a limited number of hospitals if you fall ill. Personal care help, skilled nursing, and memory care are few important factors that you need to consider.
Make sure you can get the help you need, explore both the quality of local medical care as well as the number of doctors and hospitals in the area that accept Medicare patients.
5. Consider the Quality of Life
What are your tastes and preferences? Do you enjoy the urban lifestyle with the constant buzz and feisty atmosphere? If you do, you might look for a place where you can easily walk to shopping centers, eateries, and community events.
On the other hand, if quiet, peaceful environments are your thing, move to a small town or rural dwelling which will be better suited to your liking.
Most importantly, wherever you go, ensure you’ll have access to people your age so that you get to build a new circle of close friends.
You could also consider retirement communities in the city of your choice. This could enable you to easily meet other retirees and get involved in events. You can find many places that have senior centers or clubs geared toward older citizens, creating an environment where you can socialize and make new acquaintances.
6. Consider the Climate
Of course, seniors tend to want to spend their golden years of retirement basking under the sun, and if you have lived in an area where it snows often, the warmth of a beach or southern state may be appealing. If you’ve always been drawn to the mountains, a place where you can hike or catch views of the landscape year-round might be a good fit. You might opt for a retirement spot near a lake or river if you enjoy fishing and boating.
Additionally, beach life dreamers should keep in mind that while beach towns are great for vacations, they may not be as appealing during the winter months. They may also lack nightlife and cultural experiences. Think about your hobbies and whether or not you will still be able to participate in and enjoy those hobbies in the new location.
Taking the climate into consideration will help you stay more active and involved. Keep in mind that outdoor activities are especially important as you grow older.
7. Consider Travel Plans to Meet Family
If you are far away from family and loved ones and plan to take regular trips to visit them, consider how far your new location will be from other family members. A spot that is several hours away means that you’ll want a reliable, comfortable vehicle to travel in. For frequent, longer trips, investigate the flight prices and options in the area. It is important that you live somewhere with an airport nearby.
On the whole, if moving to a new location is actually going to cut down housing costs, healthcare costs, and overall cost of living, plus the thought of moving to a new place genuinely makes you happy about spending your retirement years there, we say that you go ahead and make the move now!
We hope that the article has given you enough insights to consider while pondering over how to decide where to live in retirement. Do let us know what you think!
