Let’s start today’s post off with a story.
Dan and Darcy have lived in Washington State their entire adult lives. They met in Seattle and remained near the area bouncing in and out of the city as they worked and raised their 2 kids. As recent empty-nesters, the couple wants to explore new places and potentially even a change of scenery as they plan their upcoming retirement. 20 plus years of rain and cloudy days have left their head in the clouds, but before they exchange the 206 or 425 for an unknown area code, there are a few things they need to think about first.
Our post today is meant to take you on a journey—one that outlines what you need to know before you relocate in retirement.
Make the location intentional
You may have spent your whole life California dreaming, but the reality of 13.3% income tax, mudslides, and bloated bills may leave a sour taste in your mouth and your wallet. When you are looking for a place to relocate, there are numerous things to consider beyond what you think you have always wanted.
The first step is to make a list of the top 2-3 places you are interested in moving to or splitting your time. Ask yourself:
- Have you been to these places before? If so, have you spent an extensive amount of time there (a few weeks or a couple of months out of the year)?
- How does the climate work for you?
- Do you have a network of friends, colleagues, family, or a support system close by?
- Is it an active area where you can keep busy both physically and mentally?
- What are the healthcare systems like?
- Will this area work for you in the long-term (both personally and financially)?
Take your location for a test drive
Before you pack your bags and commit to an entirely new area, spend some time researching, exploring, visiting, and vacationing in that area. You might love Arizona for the 70 degree days in February but can’t stand the 110 degrees in August. The same can be true for a cooler climate. Perhaps you’ve always wanted to live near the Rockies in Colorado but colder weather can be hard on you as you age and shoveling snow isn’t in your wheelhouse anymore. Any area has both positive and negative aspects. Whether it is taxes, weather, cost of living, lifestyle changes, and more.
You won’t be able to answer these questions without spending an extensive amount of time in a given area. Here at TFS, we are big proponents of test driving your retirement and that includes your living situation. Take your time with this decision and be sure that you do enough research and feel confident enough in a place before you move there.
Maybe you visit for a couple of weeks a few times per year or even take a month or so to test out what living there might be like. Where do you get your groceries? Are the people friendly? Does the area have activities you enjoy? Are there clubs you can join? These are things you will only discover when you spend a significant amount of time in a location.
Keep in mind, it is wise to test out a location at multiple points throughout the year. If Arizona is top on your list, visit it in the winter as well as the summer. By experiencing a place both when you know you will enjoy it and when you might not enjoy it as much will provide a better indication if you can/want to live there full time.
Knowing how the location will impact you throughout the year is hugely important or else you risk spending a lot of time and money on a venture that doesn’t support your retirement needs.
Understand the tax changes
Taxes are probably the last thing on your mind when choosing a place to live in retirement, but a state’s tax law can significantly impact your retirement income plan. There are a few types of taxes that you should keep in mind:
- Income tax
- Sales tax
- Real Estate tax
- Estate/inheritance tax
- Vehicle taxes
All of these aspects contribute to the overall cost of living in your new area. Odds are if you leave the Seattle area your cost of living will decrease, due to lower real estate costs, which could give your budget a bit more wiggle room. When you leave an area, however, you may need to sell your house which could lead to capital gains tax. This could impact your house-hunting budget for a new place out of state.
Keep in mind that every place will have its trade-offs, a state with low-income tax might counter that with higher property taxes for example. Make sure that you understand your changing tax responsibilities so you aren’t surprised and can plan for that change. Washington is one of those rare states with no income tax and it doesn’t tax retirement accounts but the general cost of living tends to be higher the closer you get to the water and cities like Seattle.
Evaluate the health care systems
Quality healthcare is one of the most imperative aspects of any retiree’s plan. Before you move, make sure that your new area has a strong healthcare system.
This might dictate where you are reasonably able to live. A mansion in the country an hour away from the nearest hospital may not be your best bet for a long and healthy retirement. Check-out the hospitals near your area and any specialists you may need for a pre-existing condition.
Medicare costs can also fluctuate by state like advantage plans (Part C), prescription drug plans (D), and supplement plans. Be sure you know what the premium, co-insurance, copays, deductibles, and more would be if you moved.
Ensure it respects your budget
Building your retirement budget is an extensive process, one that takes into consideration your assets with your desired lifestyle. Does your new location support the budget you set for retirement? This will be helpful when looking for a home.
Especially if you are only planning to live in a place part-time, choose a residence that aligns with that goal. You probably don’t need a 4-seasons like resort condo if you are only going to be there 4 months out of the year. When evaluating properties be sure you look at the following:
- Monthly rent/mortgage
- HOA fees
If you are splitting your time, it might make more sense to rent as opposed to buying that way you aren’t on the hook for a roof leak at 2 am from 600 miles away.
Another important aspect of your housing situation is choosing a place that will work for you long-term. If you want to age-in-place, you should look for a one-story house with wide hallways, ramps, zero-entry showers, and more. There are so many things to think about in terms of your living situation but the most important is that the choices you make respect the budget you set.
Relocating can be quite expensive, especially where travel is concerned. If your family is all in Washington, that might make a permanent move to Arizona difficult as you could have increased travel costs to visit grandchildren and so on. In lieu of completely relocating, you could split your time or even just spend a month or two in a new location.
Evaluate the things that are most important for your life in retirement. By digging into those core values, you will make the right decision for you and your family.
How TFS Can Help
After reading all of this, you might want to stay in the same place, and you wouldn’t be alone. According to Investopedia, only 1.6% of retirees 55-65 moved across state lines. But if you do want to move or split your time in retirement, do your homework before committing.
Your retirement should embody your goals and dreams. How will a move help support those goals? What can you do now to help financially and emotionally prepare for that move? Know you always have help in your corner with our team.
Are you ready to add relocation to your retirement plan? Give our team a call today.