Retirees face many crucial decisions about how they will continue to lead their lives after they stop working. One of the most important decisions you will make is: Where will you live? Traditionally, retirees have just continued living where they always have, in their houses and communities, near their friends and families and familiar haunts. These days, however, it’s likely that the friends will have moved to greener pastures in retirement, the kids are living and working 3,000 miles away, and the familiar haunts are under new management. If you decide that the best thing to do is make a move yourself, what do you need to consider?
Taxes Vary From State to State
One of the first considerations is taxes. Some U.S. states have high state income taxes, others have low state taxes, and some have no state taxes at all. (Nevada, Washington, Alaska, Wyoming, South Dakota, Texas, and Florida have no state income tax; Tennessee and New Hampshire tax only dividend and interest income.) However, you should look at the whole picture; these states need to earn revenue somehow, and often do so through high sales taxes or property tax.
Sales tax, for instance, is charged in most states at varying rates as high as 8.25 percent (in California). Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose sales tax. Property taxes vary from jurisdiction to jurisdiction. And there are a number of other wrinkles. Nine different states allow retirees to deduct part of their federal income taxes when filing state taxes. And more than half of U.S. states allow retirees to exclude social security income as taxable income when filing their state returns.
The Weather Varies Too!
A second major consideration in selecting a retirement spot is climate. Traditionally, retirees have sought out warm-weather destinations, and the gulf coast regions of Florida and Texas, southern California (whether the Pacific coast or the desert), and just about anywhere in Hawaii promise some of the warmest January temperatures in the United States. However, if you’re looking for an active retirement with a full schedule of outdoor activities and you enjoy four full seasons, then there’s no particular reason to head south. Seward, Alaska; Boise, Idaho; and Ithaca, New York, none of which are particularly known for mild winters, all have their own attractions. You have to decide how you want to spend your time.
What Will You DO?
And how you will spend your time is a third major consideration. Do you want to continue working? Do you want to study for a second degree, or at least take classes at a university or community college? Do you want recreation? Employment opportunities for retirees can range from driving limousines (look for a city that’s a major destination for conventions, corporate conferences, weddings, and other large gatherings) to tutoring children (look for wealthy communities, where both spouses typically work high-powered jobs). If you love the outdoors, then settle near a national park; the Park Service hires retirees to do various outdoor jobs, paying up to $18 an hour.
As for the second degree, pinpoint a few college towns where the local university has a strong track record in offering programs to retirees. At least, you may wish to audit some courses — research the university’s policy on auditing. Small university towns are often dominated by their campuses, with most cultural and other activities taking place on campus; big cities, of course, have several universities and a wide range of activities off campus as well. It depends on what kind of groove you’re looking for.
Cost of Living
The overall cost of living is a fourth major consideration; some parts of the United States are often mentioned as inexpensive destinations for retirees (the Ozark Mountains of northwestern Arkansas; the city of Omaha; your own RV, with no fixed address). For the adventuresome, there are even cheaper places to live abroad, in Central America, for instance, or Southeast Asia. The expense of an overseas move may nullify the money saved in cheaper living costs, at least for the first few years, and cheap overseas destinations are often not that cheap unless you learn to live like the locals. However, learning to live by local standards should be part of the adventure of such a move to begin with.
Finally, compare the housing markets in your potential destinations. The housing market has been battered for the past few years (2008-2011), though it’s coming back in certain areas. You need to determine what you can sell your current house for, if you need to sell it, versus what a new house or condo will cost you in your target destination(s).
These considerations are only the beginning, but they should give you some rough guidelines in your search for the perfect retirement destination.