How to Decide Where to Retire
One of the freedoms of retirement is getting to choose where to live. Rather than being tied to a specific city due to work or school commitments, the entire world suddenly becomes a potential place to retire. Before leaping to a new town, state or country, it's worth exploring the impact the choice could have on your lifestyle, family commitments and well-being.
Use these criteria to select a retirement spot:
-- Think about the cost of living.
-- Consider the quality of life.
-- Evaluate the tax environment.
-- Look at the climate.
-- Factor in travel plans.
-- Start with a trial run.
Here is how to find the ideal place to spend your retirement.
Think About the Cost of Living
When you retire, you may go to the movie theater more often, frequent restaurants with friends or take on new club memberships. Look at how you want to spend your time and then calculate the costs involved with these commitments. Also go over basic living expenses, such as housing costs, gas prices and grocery bills. If you're planning to move to a new area, "check out the businesses you might frequent and compare the cost," says Dan Trumbower, a senior wealth advisor at Halpern Financial, a wealth management firm in the District of Columbia area. You could find that a place with low taxes has higher prices on everyday goods, or you might discover a city that initially seems pricey but has a reasonable overall cost of living.
When calculating prices, don't overlook costs related to health care. While you may have coverage through Medicare, you'll want to factor in the costs of over-the-counter medications, therapies that aren't included in your insurance and specific services you might need to pay for out of pocket, such as vision care or dentist visits.
[See: The Best Places to Retire in 2020.]
Consider the Quality of Life
If you enjoy the urban lifestyle, you might look for a place where you can easily walk to shopping centers, eateries and community events. If you long for a quiet, peaceful environment, a small town or rural area might be better suited to your preferences. Wherever you go, "Make sure you'll have access to people your age to build a new circle of friends," says Pat Roque, a boomer and career pivot coach from New Jersey who purchased a condo in Myrtle Beach, South Carolina, two years ago to begin transitioning to an early retirement.
Some cities have retirement communities, which could enable you to easily meet other retirees and get involved in events. Other places have senior centers or clubs geared toward older citizens, creating an environment where you can socialize and make new acquaintances. One of the reasons Roque and her husband chose Myrtle Beach is the wide range of activities the region offers for retirees. There are "100 golf courses within an hour's ride, plus beach, biking and volunteer opportunities," Roque says.
Evaluate the Tax Environment
Certain states may initially appear to be more tax-friendly than others, but you'll want to look at the full financial picture to get a solid grasp on what you'll need to pay in retirement. "Some states with high income taxes don't tax Social Security in retirement, so your current tax situation could change when you transition to retirement," Trumbower says.
There are seven states with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire and Tennessee don't impose taxes on earned wages but do charge taxes on investment income and interest. While you might save on income tax expenses in these areas, they "may have other taxes or cost of living differences that need to be accounted for," Trumbower says. If you live abroad and are a U.S. citizen, you will still need to file a tax return for the U.S. each year. What you owe will be determined by factors such as the place you live, global investments and other sources of income.
[See: The Most Tax-Friendly States to Retire]
Look at the Climate
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. "Taking the climate into consideration will help you stay more active and involved in things you love," says Andrea Smith, executive director of Senior Action, a nonprofit organization in Greenville, South Carolina, that focuses on keeping older adults active, healthy and engaged.
Factor in Travel Plans
If you plan to take regular trips to visit children and grandchildren, consider how far your new location will be from other family members. A spot that is several hours away from close relatives by car might mean you'll want a reliable, comfortable vehicle to travel in. For frequent, longer trips, investigate the flight prices and options in the area. "If you plan to travel a lot, take quick trips here and there or simply want your family to be able to come visit without a hassle, it's important that you live somewhere with an airport nearby," Smith says.
[See: The Most Affordable Places to Retire]
Start With a Trial Run
Before purchasing a home in a new area, consider spending several weeks in the new location to scope out the rhythm of daily life. If possible, "rent at varied times of the year so you can see the culture, pace and traffic that you'll experience as a permanent resident," Roque says. Explore the community activities offered during your short-term stay and ask locals for recommendations and insights to further understand the area.
