Where you live has a big impact on your finances. Your location impacts cost of living, as well as the cost of your housing. Once you decide to retire, one of the things you need to consider is whether or not it’s time to move.
Whether or not you should move depends on a number of factors, including your financial situation and your lifestyle preferences.
Your first consideration should be your financial situation. Can you afford your current living situation now that you no longer have income from your day job?
If you still have a mortgage, you need to figure how much you spend each month to determine whether or not you can still handle it when youmortgage, it can make sense to stay in the home, essentially “rent free,” as long as you can afford property taxes, insurance, and utilities, and afford maintenance and repairs.
Even after you’ve paid your mortgage, it might still make sense to sell your home and downsize if you want to better your financial situation or if you want to spend your retirement money on something else.
Cost of Living
Even if you can afford your current housing situation, can you afford where you live? Many retirees choose to move if they can find a town (or even another country) with a much lower cost of living. This can be about more than just the cost of food and transportation in addition to housing. One of the biggest concerns will be health care. You can supplement your Medicare with gap coverage and with a Health Savings Account, as well as building up your nest egg over time.
There are some states that have lower taxes, and countries that won’t tax you as much. Before you leave the country in retirement, make sure you understand the implications. Be clear about how your insurance coverage works when you live as an expatriate, and consider how you will manage money in a foreign currency. You might need to open a bank account at a local bank, and pay attention to currency exchange rates. Finally, don’t forget that depending on your income situation, and how you take distributions from your retirement accounts, you might still be subject to some taxes in the United States.
Another consideration might be estate issues. Different states collect different amounts in estate taxes and other after-death taxes. If you are considered about your legacy, and how much is passed onto your heirs, moving can make sense.
Take into account your financial goals for now and in the future, and determine whether moving to another town, state, or country will better help you meet your objectives.
No matter how much money is at stake, you can’t forget about your lifestyle preferences. If you want to live near your children and grandchildren, you might choose to stay in a more expensive area. As long as you can afford that lifestyle (even if you have to downsize to make it work), that can be a good choice because the point of retirement is to enjoy your family and your life.
Other retirees like the idea of moving someplace warm, while others want to travel. You might move your “home base” to a less expensive location in the United States, and then spend the rest of the year traveling. Perhaps you decide to sell your home and travel regularly, without keeping a set home.
Finally, remember to plan for the possibility of long-term care. You might have no choice but to move if you need to transition into assisted living or some other long-term care arrangement. Consider the size of your nest egg, and look ahead to this possibility before you get to this point.
The best time to consider whether or not you will move in retirement is before you retire. In the years leading up to retirement, consult with a financial planner about your options. Talk about your lifestyle goals and your financial situation so that you can create a long-term plan that takes into account various possibilities. One option might even be to purchase a long-term care policy, just in case you need it later on.
Retirement is an exciting chapter in your life. You might need to move to improve your financial situation or to meet other lifestyle goals. Whatever you decide, make sure you plan ahead of time, and consider your options. A good financial planner can help you map out the possibilities and plan your finances now so that you are comfortable later.