Retirees fret about their portfolios in a turbulent market and rightfully so, but for many, the most important financial and personal decision is where they retire. If they make a mistake — moving to a town they don’t want, buying a home that’s not right for them, or meeting the costs they didn’t expect — it’s a permanent dent in their retirement.
While the majority of retirees stay home during their working years, searching for a sizable chunk move or even more miles in search of better weather, lower taxes, or near to family. The recent run-up to home values has increased to the impetus. Many seniors are sitting on the sidelines of their home equity, and they hope it will help finance their retirement if they have a cheaper location.
But property prices are also popular retirement destinations. Retirees may save less money than they do on the move, or even have trouble buying a home at some of the hottest markets.
Here are some things to keep in mind if you’re planning on moving to retirement:
Low income taxes are everything. Many retirees who live in states with high taxes are eager to move to states with no income taxes, says Rhian Horgan, chief executive of Silvur, an app that helps baby boomers navigate retirement. But she says they need to look at their total costs, including property taxes, sales taxes, and healthcare costs.
Florida has no income tax, for instance, but has high healthcare costs. Horgan says the average medical cost of supplemental medical and drug insurance on a person is $ 8,352 a year in total medical costs. That’s $ 6,208 a year in Tennessee, another state with no income tax.
In fact, Silvur calculates that the couple will have $ 1.1 million in total assets to run out of money at age 88 in Florida but age 104 in Tennessee.
That couple’s money would run out in age 77 in Hawaii, even though every spouse would pay just $ 5,408 in Medicare, the lowest in the country, according to Silvur. Hawaii has high real estate costs and income taxes.
“Even with really low healthcare costs, it is a tough place to end up and retirement in a lifetime,” Horgan says.
And no matter what state you pick, you can’t afford dodge taxes. While Tennessee has no income tax, it has some of the highest sales taxes in the country.
Buying Before Renting. Advisors say they don’t see lots of retirees who move to Florida or Arizona or Tennessee and hate it. Many have already vacationed there before moving extensively.
However, advisors often do so when they move across the country and decide they’d rather live a few miles away. For that reason, they almost uniformly advise retirees to buy a home before they make a big move.
That’s true even if you’ve been vacationed, or been a snowbird, for years in one place, says Rick Miller, a Boston-area financial advisor. The quiet town you love on vacation may drive you crazy all the time.
“The experience of being in a few months is a whole year from being very different,” he says.
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Have a plan. Jonathan Harrison, a financial advisor in the Kansas City area, says every retirees who need to move should retire for a long-range plan.
“Phase one might be where you want to be in warmer weather or a lot of travel,” he says. But Harrison says a later phase may be the family near moving back.
Harrison client Kim Mastalio, 74 years old, is a prime example. Mastalio spent his work life as an engineer in the Kansas City area. After retiring, he and his wife split their time between moving to the Kansas City and San Diego areas for several years before moving to California.
The couple had plans to return to Kansas and their children and grandchildren, but in 2020 the pandemic struck and changed their plans. Mastalio found himself uncomfortable with the harsh measures California was imposing to fight the pandemic. “Everything changed,” he says. “It’s much more stringent and locked down in California than in Kansas.”
After a year of virtual isolation, the couple decided to move back and forth much earlier than planned for Lawrence, Kan., Where one of their children lives. They rented a while, and then bought a house.
“I came out of it fine,” says Mastalio. “We always knew we would come back here to be near family.”
Give yourself options. If you move somewhere and buy a new house, don’t just think about your current needs but also your future needs, says Rodney Harrell, AARP vice president for family, home and community.
Pay for a little extra wider doorways and “zero-step entrances” that will accommodate a wheelchair or anybody that has trouble. Install grab bars. Consider building an auxiliary dwelling unit where a child or caregiver can live if your health declines.
You may feel fine now, says Harrell, but things can change in a hurry. And, by the way, you can give yourself options so that you can remain in the same home.
Moving your children is always a good idea. As retirees head into their late 70s or 80s, some will move to adult children. This can make a lot of sense, especially for seniors who are on their own and need more help.
But it can also be good for seniors who are in good health who are moving away from their friends.
Michael Landsberg, a financial advisor in Punta Gorda, Fla., Says he had a number of clients who moved south to Florida in their 50s and 60s, and then moved back north 10 or 20 years later to learn about their family only. you can’t always go home again.
“They often find their children and grandchildren are too busy to spend a lot of time with them,” says Landsberg, a client who says five years ago they were excited about the move. Louis area to be near family but came to regret it. He says the client told him: “I probably see my kids and grandkids one day a week, and six days a week. I miss my friends in Florida.”
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