Where Should I Plan to Retire?....
It’s no secret…each year retirees (often dubbed as Snow Birds in the North) make an annual migration away from cold winters and move toward warmer, milder climates. As the seasons change, they’ll often move again in order to find the most comfortable temperatures. When you retire, will you be a part of this migratory flock, or will you establish a permanent homestead throughout the year? Is the weather the only factor to consider?
While you’ll always find plenty of lists that detail the top cities for retirees, the truth is finding the best place to retire deserves detailed consideration. Choosing your home location for retirement is about more than tee times and tennis courts; it’s a delicate balance of lifestyle requirements and financial constraints. Your best option will emerge when you consider these three factors.
COST OF LIVING
Your cost of living is a blend of expenses related to housing, utilities, leisure, medical and basic needs. A recent Consumer Expenditure survey by the Bureau of Labor Statistics estimated the following annual spending averages for senior households: Food $5,340; Housing $13,432; Transportation $7,781; Entertainment $2,060. How much will it cost to live in your current city and state versus moving to a different locale? Remember, state income tax rates also factor into total cost of living. Seven states have no income tax; eight feature flat taxes, and others kick in tax rates as high as 8.5-10% on income over a certain level. Maine, for instance, levies an 8.5% rate on income over $20,150. Generally, the highest rates are found in California, Hawaii, New York and New Jersey.
States with the lowest cost of living tend to be throughout the South and Southwest. You can find various online tools for specific comparisons, or you can request cost of living data directly from the Chamber of Commerce of your target city.
Retirees are often prepared for a change in income level, but may not be prepared to scale their lifestyle and living arrangements accordingly. The Federal Interagency Forum on Aging-Related Statistics reports that housing, in particular, is a burden to 40% of older Americans as their expenditures on housing and utilities exceed 30% of household income. Housing costs over this amount limit the average household’s ability to meet other cost obligations such as food, clothing, utilities, healthcare, taxes and debt. Arguably, retirees should aim for far less than 30% of income to be spent on housing in order to allow for healthcare costs and other unforeseen expenses. According to the American Community Survey by the US Census Bureau, California has the highest share of mortgaged homeowners with housing burden; it is followed by Hawaii, Nevada, Florida and New Jersey.
If you own your retirement home, property taxes are also a factor. The Tax Foundation recommends calculating property taxes as a percentage of home value for an even benchmark across various property values and tax rates. Louisiana, Hawaii and Alabama offer the most favorable rates of home value versus amounts paid in property taxes.
QUALITY OF LIFE
Balance the financial considerations for cost of living and housing with your lifestyle goals for retirement. Do you enjoy four seasons or moderate temperatures all year long? If an active retirement is your style, research cities with walking trails, parks and golf courses or tennis facilities. Often, retirees adopt academic pursuits and work towards a certificate or degree. Many universities offer tuition and fee waivers for adults aged 60 and older. Other quality of life factors include performing arts, ease of travel into and out of the city and ease of transportation throughout the community. Depending on your health, you may also need to consider ease of access to healthcare or specialists related to a chronic condition.
Move beyond the Top Ten lists and make a fully-informed decision about the best place to retire. Let me know how I can help you calculate your income level throughout retirement so that you know exactly what –and where–you can afford.
2016-33314 Exp. 12/18