One of the most important decisions that you will have to make as you approach retirement is where to live. This decision is incredibly complex because it depends on so many factors, including whether you own your home, your monthly mortgage payment, the resources available around you, and the cost of living in your area. Also, you will need to consider the monthly income you will have available to you in retirement.
Of course, you can choose to move again in retirement, but moving can be a costly decision that you will likely need to prepare for in advance. Because the question of where you will live is so complex, it can be helpful to break the decision down as much as possible. Some key points to consider include:
1. Quality of life
When it comes to retirement, quality of life is extremely important. Think about the lifestyle you like and the locations that can make that happen. Some people enjoy urban environments that let them walk wherever they want to go, whereas others like a more rural location. No one choice is better than the other. While it is important to be close to health care and shopping, you can likely find these resources anywhere you move.
You might also want to consider where your friends plan to retire. Having people nearby to do things with can be a great boost to your overall quality of life. In terms of this category, it is also important to think about whether you would enjoy a retirement community or something more isolated.
Different climates appeal to different people. If you have lived in the mountains most of your life, perhaps it is time to go somewhere a bit warmer. On the other hand, perhaps the idea of a colder environment sounds appealing. Consider the things you love to do and how climate would impact them. If you love hiking but live in a place with snow most months out of the year, maybe a different climate would be better.
In terms of health, it is important to stay active during your retirement years, so think about how climate would impact your ability to get outside and/or engage with other retirees. Some retirees choose to change their location between summer and winter, which is also a possibility considering your finances.
3. Cost of living
Since you will likely be on somewhat of a budget during retirement, the cost of living matters a lot. However, your expenses will change based on what you like to do with your time. If you have expensive hobbies or enjoy going out to dinner frequently, perhaps it makes sense to live somewhere with a lower cost of living. That way you have the spare money to do these things. If, on the other hand, you do not spend much outside of housing costs, then living somewhere with high rent or expensive property becomes more feasible. Also, look at more than just property costs. Gas, groceries, and healthcare expenses fluctuate depending on where you live, so be sure to consider your entire budget and how it would be affected.
Taxes in retirement can be quite tricky, so it is important to get the full picture of any place you would consider living. For example, some states with higher income tax choose not to tax Social Security income, which means that you would be better off moving there than a place with lower income taxes. Some states have no income tax at all, but they may charge taxes on investment income and interest earned. You need to pay attention to the fine print when it comes to taxes before you get an unpleasant surprise after moving. Also, you should know that you will still need to file a tax return for the United States each year if you live abroad provided that you remain a citizen. The tax rate depends on investments, other sources of income, and living location.
The amenities needed in retirement depends on the person. You may need to live somewhere with a good economy in case you need to earn some extra income. Perhaps access to great hospitals and assisted living facilities appeals to you. You could also think about wellness opportunities, such as golf courses, fitness centers, and ski resorts. If you’re a fan of culture, research local libraries, art venues, museums, and more.
Ultimately, you need to think about the amenities that are most important to you and make sure you will have access, especially if you are moving from your current location. Importantly, consider your ability to access these amenities on public transit, which is itself a key amenity for many retirees.
Many retirees take advantage of not working by traveling a lot. If you plan to travel to a specific location frequently, take that into account when deciding on a place to live. Perhaps it makes sense to relocate near that location. For example, if your grandchildren live in California, relocating to the West Coast could make sense. If you have a timeshare in Martha’s Vineyard you will go to frequently, you could save a lot of time and money by relocating to the East Coast.
Thinking about travel can help make a place that seems too expensive more affordable when you factor in other forms of saving. At the very least, you will want to choose a location with a nearby airport if you plan to travel a lot.