Tips for moving during retirement
As the baby boomers who have been proactive in their retirement planning ease into their golden years, many are asking an age-old retirement question: Should we move?
Traditionally, many retirees have picked up and moved to warmer places, such as California and Arizona. Others have migrated to states that combine a mild climate with low taxes, such as Florida or Texas.
Moving makes sense for many people, says Sheila Handy, department chair and associate professor of business management at East Stroudsburg University in East Stroudsburg, Pa. However, it is important to make smart choices before you uproot your life.
In the following interview, Handy offers her thoughts about what retirees need to consider before moving.
Some people think about moving after they retire. What are some good reasons for moving?
There are several reasons one might want to relocate after retirement. Many reasons would likely relate to finances, such as moving to an area with a lower cost of living, "trading down" for a small house with lower property taxes and less maintenance, and choosing a state with a lower income tax rate and/or an overall lower cost of living.
Other reasons may include moving to an area with a better climate or to be closer to family, and to move to a smaller house -- perhaps a one-level home or one where maintenance is performed by others.
What types of problems can moving solve?
Depending on where the retiree decides to move, he or she may avoid such things as snow removal, yard care, and climbing up and down stairs. Also, if moving to a state with a lower personal income tax rate, retirees can increase their disposable income due to state taxes saved.
Additionally, moving into a smaller, less expensive house may result in the retiree earning additional income by investing the excess proceeds from the prior residence. If the retiree does not have adequate income from pensions and Social Security, then finding ways to reduce expenses will be imperative.
What variables are most important to consider when a retiree is contemplating a move across state lines?
Naturally, taxes should be a consideration. Some states tax only a portion of retirement benefits, and others fully exclude retirement income from tax. Certain states include a portion of Social Security benefits in the calculation of taxable income. Therefore, although the state tax rate may be lower, if a larger amount of income is taxed, then the overall tax liability may be greater in one state than another.
Additionally, inheritance taxes vary by state, so retirees with large estates should be aware of the potential state "death tax" burden.
As previously mentioned, a state with a lower cost of living will be more attractive to retirees, as long as it is not offset by reduced services, such as health care and safety.
Should a state's crime rate be considered?
The crime rate is a factor that anyone contemplating a move should consider, not just those who are moving due to retirement. However, since retirees might spend more time traveling, moving to an area with a lower crime rate might result in greater peace of mind.
What about access to medical care?
This is also an important consideration, since the need for health care tends to increase as one ages. Retirees should not have to travel a great distance to secure quality health care.