Where Should You Retire?
It may seem a long way off, but just as you’re spending time now thinking about how you’re going to afford to retire, you might also consider starting to think about where you’re going to retire, too. (And, I know that if you’ve been working on the Movie of Your Life worksheet, you’ve already started to consider your options. Right!?)
When I started thinking about where I might retire, I was disappointed to find that most articles ranked cities and towns based on weather, smog, and cost of living. These are all important elements, to be sure. Through my clients’ experiences, however, I have learned that some other measurables are important to consider too.
I have a client who was absolutely smitten with San Diego. It was 2007, and because her husband was a salesman and could do his job from any city of his choosing, they decided to take the leap and retire a few years early. After decades of gloomy, grey Chicago winters, she couldn’t wait to soak up some of that California sunshine. Besides, she thought, while her husband was traveling for work, she could get a part time job with a local school, stay busy, and make new friends.
It was a great plan!
In reality, however, she quickly found that finding that part-time job wasn’t quite so easy. San Diego has a small town sensibility and the locals had the advantage. The social circles weren’t so easy to break into either. With her three children living elsewhere and her husband still traveling for work – she was lonely. Coupled with all of this, it turns out that the cost of living was even more than they had anticipated. This, while the Great Recession of 2008 was just taking hold, the value of her new home quickly dropped. San Diego simply wasn’t all she had hoped for, and before long, she wanted to move back to sweet home Chicago.
So, in an effort to save you heartaches and headaches, here are some additional criteria that you should consider as you ponder your retirement plans?
Cost of Living
Really take a look at cost of living in that new place. Do the math. Find out what it costs to buy a gallon of milk and what it costs to buy a house. Go out to dinner a couple of times. Go to the movies. Determine whether or not you will be able to maintain your standard of living in your new hometown.
Access to Healthcare
What is the healthcare community like? Are there doctors close by? Is there a good hospital nearby? Even better – is it a University hospital? Living on an island is lovely, but driving an hour each way to see the eye doctor or podiatrist is no picnic.
Based on your investment portfolio, how will your retirement income be taxed? For example, in Illinois, withdrawals from your IRA are not subject to state tax. Your IRA withdrawals will only be subject to Federal tax. Other states impose their state income tax on those withdrawals. How will that affect your net after tax cash flow?
And finally, how much are real estate taxes on the property you’re looking at?
A suggestion I often make to people looking to relocate and retire is rent a place for a couple of months in what you hope will be your new hometown. Visiting and living somewhere can be two different experiences. By renting for a short amount of time, you’ll be able to confirm that this is where you want to live without making a lot of financial commitments that will take time and money to undo.