Assessing Financial Adjustments in Retirement: A Comprehensive Guide by a Financial Expert
In the journey of retirement, making the decision to move or downsize is a significant milestone. To ensure a smooth transition and maintain a high quality of life, it's essential to consider factors that focus on health, social relationships, and financial security.
Health Factors
One of the critical aspects to consider is access to reliable healthcare providers and specialists, especially if you have pre-existing medical conditions. Moving to a location without suitable healthcare can be costly and stressful due to frequent travel for care. The environment should also support healthy aging, with good walkability to maintain mobility and easy access to transportation options like public transit or ride-sharing.
Social Relationships
Proximity to family, particularly children and grandchildren, is often a strong consideration. However, retirees should also assess the presence of friends in similar life stages and the potential to build new social networks. Social connections are vital for emotional well-being during retirement. Retirement communities, such as continuing care retirement communities (CCRCs) or naturally occurring retirement communities (NORCs), often provide social opportunities and a built-in community of peers.
Financial Security
Housing costs go beyond the purchase price and include property taxes, insurance, condo or HOA fees, upkeep, utilities, and future costs related to aging in place. Downsizing can free up equity but must fit into an overall retirement financial plan. Tax implications such as estate or inheritance taxes and state income tax rates should also be evaluated. Sometimes lower-cost living areas come with trade-offs in health care or social opportunities. It's crucial to consider if the new home allows for aging in place features such as single-story living and accessibility to amenities to avoid costly future moves.
When deciding to move or downsize, it's essential to take a holistic approach. Prioritise health and social relationships first to ensure quality of life, then weigh financial factors to support long-term security and comfort. Downsizing is not just a financial decision but deeply tied to maintaining health, social engagement, and lifestyle fulfillment during retirement.
The Kiplinger Building Wealth program features financial advisers and business owners who share retirement, estate planning, and tax strategies. The program's experts include professional wealth managers, fiduciary financial planners, CPAs, and lawyers. The tax planning software they offer allows for changing the state return to see how much state income taxes would change if one moves. A free version of the financial planning software is available for access.
Relocating based solely on children and grandkids can be problematic, as they may be in their busiest stage while retirees are in their least busy. It's crucial to consider where friends are and the ease of making new friends when thinking about a retirement relocation.
The experiences of some clients who moved during the COVID-19 pandemic serve as a reminder. Moving from the Washington, D.C.-area to Florida, they found that their experience was not as enjoyable as their vacations due to restrictions on dining and Florida's summer weather. Cost of living is not just housing costs, but also includes state income taxes, property taxes, taxation of retirement distributions, and estate taxes.
In conclusion, a well-planned retirement move can bring numerous benefits, but it's crucial to consider all factors carefully. The article was written by a contributing adviser, not the Kiplinger editorial staff. Their records can be checked with the SEC or FINRA.
When making a decision to move or downsize during retirement, it's important to consider not only financial factors such as housing costs, tax implications, and estate planning, but also the impact on personal health, access to healthcare, and social relationships. Additionally, the Kiplinger Building Wealth program can offer valuable insights and tools to help retirees weigh these factors when planning a retirement move, with a focus on maintaining financial security and a high quality of life.
