Where you plan to live in retirement is as important as when you plan to retire.
You should start planning for your retirement location up to 10 years before you retire.
Financial factors to consider include cost of living, taxes, housing and insurance costs.
Many people put a lot of thought and planning into when they will retire, whether it’s at a certain age or on a particular date. But it’s just as important to think about where you will live after you retire.
Determining where to live in retirement is a highly personal decision that’s different for every couple or individual. Several factors go into this decision, from lifestyle and family considerations to the tax and financial implications of living in a particular state. Let’s take a look at choosing where to retire.
According to Sandra Fleming, managing director with U.S. Bank Private Wealth Management, couples and individuals should start by making a “bucket list” of all the things they think they’ll want to do in retirement. “This will go a long way toward helping you decide the best place to retire,” she says.
For example, if you enjoy the outdoors, you might want to live in an area with a mild year-round climate. If you plan to travel, you might choose an area that’s convenient to an international airport. And if you enjoy the arts, theater and music, you should probably focus on metropolitan areas with vibrant art and entertainment scenes.
“You might need to plan on much higher homeowner’s insurance premiums in states with a high risk of natural disasters like hurricanes and earthquakes.”
Sandra Fleming, managing director with U.S. Bank Private Wealth Management
“Sometimes I tell clients to consider college towns as places to retire,” says Fleming. “These are usually lively communities with lots of things going on.”
Proximity to family and friends is often another important factor in choosing a retirement location, especially if you want to spend time with your adult children and grandchildren. Moving to a new city later in life without a support system can be isolating and negatively affect your physical and mental health.
Fleming encourages clients to plan for the long term when thinking about where to live in retirement. “Your health will change throughout the course of your retirement,” she says. “As you age, you might not be able to do some of the things you can in your early retirement years, so factor this into your decision.”
Finances will play a big part in where you live during retirement, starting with the cost of living. This includes cost variations for things like housing, taxes, food, healthcare and other common expenses.
The cost of living in New York City is more than two times higher than national average, for example, while the cost of living in Tupelo, Miss., is 81% of the national average, according to the 2022 Cost of Living Index.
“Your retirement income may be fixed, so you must plan carefully to make sure it’s enough to meet your living expenses throughout the course of your retirement,” says Fleming. Do some research on the following cost of living factors in any areas you’re considering living in during retirement:
Seniorly analyzed eight financial metrics (cost of living index score, average retirement income, housing costs, utility costs, senior poverty rate, average annual Medicare spend per beneficiary, average annual cost for home health aide, and tax-friendliness for retirees) to determine the most affordable states for retirees.
Here are the top 5:
Fleming recommends that clients start thinking about where they might want to live up to 10 years before their planned retirement date. “Then, between three and five years before retirement, start narrowing down possible areas and spending time there to get to know them,” she says. Some of her clients have bought vacation or second homes in areas they’re considering to get a feel for what it would be like to live there.
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