Where Should You Retire? Factors to Consider

Where do you want to spend your retirement? For some, the answer is clear and may come from years of dreaming—whether it’s downsizing in their hometown, a change of scenery in a new state, or even moving somewhere abroad. But for many others, it can be a complex and challenging question, especially for those who have lived in the same home for decades.

Ultimately, deciding where to live will require a careful balance of financial considerations, such as cost of living and taxes, and lifestyle preferences, including family proximity and recreational activities. In this article, we’ll offer an overview of factors to consider as you select a residence and highlight some of the common mistakes to avoid during the process.

Financial Considerations

As you settle on a place to spend your retirement years, one of the most crucial aspects to consider is whether it’s a smart decision financially. However, various factors may play into this and can vary from person to person. You’ll encounter considerations such as cost of living, taxes, and navigating the housing market, which you may have to weigh against other desires such as lifestyle and closeness to family.

Cost of Living

A primary financial attribute to remember as you select a place to live is whether you can afford the cost of living. That is, will your retirement income—which can be limited for some—be enough to support the various expenses associated with living in a certain place?

One way to estimate overall living expenses is using calculators, such as the Economic Policy Institute’s (EPI’s) Family Budget Calculator. It allows you to examine a specific city or metro area and price out some of the following to help determine the cost of living in a location:

• Housing costs (HOA fees, property taxes, utilities, etc.)
• Food and groceries (including sales tax)
• Transportation (gas prices, public transportation, etc.)
• Health care costs
• General expenses

Taxes

Taxes are another aspect to consider when choosing a place to retire. While several types can affect your retirement cash flow, including sales and property taxes, income taxes can have a direct impact. Federal taxes on withdrawals from retirement accounts, such as 401(k)s and Individual Retirement Accounts (IRAs), and benefits like Social Security are guaranteed; however, you could face more taxes if you live somewhere with a state income tax.

Currently, only nine states don’t impose an income tax, including:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

The clearest solution would seem to be moving to a state that doesn’t have a state income tax. However, Tyler Meyer, CFP^®, founder of Retire to Abundance and QED Wealth Solutions, points out that “prioritizing taxes is rarely worth it” and they “tend to be a more significant factor only if you have above-average retirement income.”

It’s also important to note that some states that don’t have an income tax may increase sales and property taxes. This could increase your living expenses and, as Meyer suggests, may make it not entirely worth it to move elsewhere just due to taxes.

Rather than letting taxes control where you live, they can play a role in your larger retirement blueprint. For example, you may integrate them into your plan with the help of a financial advisor or tax planning professional to decide how they affect your cost of living. You could also use them to inform a withdrawal strategy for your savings and investments.

Housing Market and Selling Your Home

If you own a home, you should also consider whether you plan to sell it to supplement your retirement income plan, keep it as your primary residence, or rent it out to create income. Each could be a valid financial consideration depending on your needs and goals. To help decide this, it can be a good idea to work with a financial advisor.

Finally, it’s smart to research the housing market to assess the availability of homes or retirement communities in your price range. This is especially the case if you’re planning on selling your home ahead of or during retirement and either want to downsize to a new home or rent going forward.

Healthcare and Long-Term Care Access

As you pinpoint a location to live out your golden years, you’ll want to ensure access and proximity to health and long-term care options, such as hospitals, clinics, assisted living, or nursing facilities. According to Meyer, however, even though most people in the United States can access medical care options near them, “the quality and specialization of care can vary” and “[if] advanced or specialized medical care is a priority for you, it might influence” where you decide to live.

Before moving somewhere, therefore, it’s wise to research medical options in the area and get the lay of the land. Consider taking the following steps:

• Assess quality. Look online for reviews to get an idea of the general quality of an organization by other patients and customers. You could also hear the opinions of others who live in the area.
• Check insurance coverage. You should also verify to make sure there are options in the city or surrounding areas that your health insurance plan supports.
• Evaluate proximity. “Close proximity to hospitals and senior living homes are most important,” says Kevin Jerry, owner and partner at Kevin A Jerry MST & Associates. If you foresee more medical needs, it will be important to be as close as possible to get the care you need.

Lifestyle Preferences

Most people have at least a loose vision of what they want their retirement to look like. This often takes shape due to various lifestyle preferences—whether it’s seeing the world, spending more time with family, or playing golf every day with friends—which can greatly influence where you may choose to live.

“Do you like to ski, run, be outside and can you drive to many family events?  Remember you now have time to enjoy life, pick a place that will give you the most enjoyment and easy access to family,” Jerry advises.

Here are some lifestyle desires you may use to select a retirement location:

Climate and Weather

Weather is a common factor people use to decide where to retire. Some may prefer living somewhere with warm weather, while others may desire a location with more moderate seasons. It’s also not uncommon for individuals to want to go to a warm locale for half the year and return to their home state for the summer months.

Climate can be an important consideration because it can affect the types of activities or the overall lifestyle a person could live. For example, in a warmer state, you might be able to do more outdoor activities such as hiking, golfing, or walking than in a state with harsher weather conditions, especially during the winter.

Community and Family

Proximity to family and friends is another important aspect to think about when you’re looking for a retirement location. If you’re close to relatives, such as your siblings, children, or grandchildren, then it might be beneficial to settle near them so it’s easy to visit or help each other out whenever possible. The same is true if you have a social circle of friends you still wish to see in retirement, as this could help give you purpose and keep life interesting.

Staying close to family can be tricky, however, possibly requiring some careful balance of your personal and financial plans. For instance, according to Don Faul, CFP^®, Managing Partner and Wealth Advisor at Mercer Partners Wealth Management, “Moving to be closer to family in a high-cost area might require downsizing or adjusting spending habits.”

Recreation and Entertainment

The activities and sources of entertainment you hope to partake in during retirement are also important. Before moving somewhere or deciding to stay in an area, be sure it has the recreational and cultural activities and access to hobbies you want to take on or continue into your post-working years.

Relocation Can Be Difficult

Another vital detail to keep in mind when choosing where to live in retirement is that it can be challenging—for both emotional and practical reasons—to pick up and move somewhere else. This will be something you’ll want to weigh heavily, especially if you’re relocating over a long distance or in a completely new environment, such as abroad in another country.

If you’ve lived in the same place for years, for instance, you might have built a sentimental attachment to the area and the people who live there. Maybe you’ve raised your family there, built a long career, or met lifelong friends. In any of these cases or more, it can bring mixed emotions to move somewhere else, even if it’s the destination of your dreams.

Practically and financially speaking, relocating can also be daunting. For example, if you’ve accumulated a lot of belongings over the years, you’ll have to decide what you want to keep and how much you’ll want to haul to your new home. In some cases, this can be expensive to handle, especially if you’re employing the services of a moving company.

Balancing Financial and Lifestyle Goals

As we’ve mentioned throughout this article, both financial and lifestyle considerations will play integral roles in where you choose to spend your retirement years. But while both are important, they don’t always match up and may have different priority levels over your decisions. Therefore, you’ll need to find a balance and understand the value each consideration holds in your life.

For example, while it’s necessary to have a certain amount of income and funds saved up to live the life you dream, Meyer points out that “lifestyle preferences should take precedence over financial considerations.” It can be a mistake to live a life you don’t enjoy for the sole reason of saving money or bolstering a supposedly good financial plan. A drastic example of this, for instance, would be moving to another state to avoid income taxes, but being far away from family and friends you care about.

“If you’ve done a solid job saving for retirement, your financial picture should be flexible enough to let you prioritize what truly matters,” says Meyer. “I like to use the analogy of rocks in a jar—place the big rocks (like family, friends, and lifestyle) first, followed by the medium rocks (things like weather or medical care), and let the small rocks (money) fit around them. Financial considerations are important but shouldn’t overshadow what will bring you fulfillment in retirement.”

As Meyer suggests in his analogy, fulfillment—whatever that looks like for you—is a key consideration in retirement. You’ll need to take some time to think introspectively about how to balance your financial objectives with the more personal and emotional pieces of your life, such as spending time with family or friends or tackling new hobbies. “By carefully weighing both personal and financial priorities, retirees can make smart decisions that bring comfort and financial security,” says Faul.