Assessing Financial Adjustments in Retirement: A Comprehensive Guide by a Financial Expert
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Making the decision to relocate during retirement is a significant move, and it's essential to consider various factors beyond just cost. This article, written by a contributing adviser and not the Kiplinger editorial staff, sheds light on these crucial aspects.
When contemplating a move, it's beneficial to use physical and mental health, ease of maintaining health and aging well, social relationships, and financial security as the basis for your decision framework. Research, such as The Harvard Study of Adult Development and the University of Michigan Health and Retirement Study, suggests that these factors are highly correlated with retiree contentment.
Cost considerations for a relocation include state income taxes, property taxes, taxation of retirement distributions, and estate taxes. For instance, moving from a state with high income taxes, like Washington, D.C., to a state with lower taxes, like Florida, could offer significant savings. However, the cost of capital gains taxes, transfer taxes, and agent commissions should also be taken into account. In one instance, these costs amounted to about 20% of the home equity each client had built.
While grandkids are often a top consideration for a retirement relocation, it's equally important to consider where your friends are and whether you can make new friends easily. Places like Continuing Care Retirement Communities (CCRCs) and Naturally Occurring Retirement Communities (NORCs) can be easy places to find friends due to the large cohort of retirees.
The location's amenities, such as good areas for walking, easy access to public transportation, and ride-sharing apps, also play a vital role in maintaining health and aging well. On the other hand, moving to a location that does not align with your lifestyle preferences, such as a vacation destination without dining out options or enduring a Florida summer, might not provide the desired retirement experience.
The expert mentioned in the article is Dr. Banz, a lawyer specializing in medical product law (Medizinprodukterecht), cited in the context of regulatory requirements for systems and treatment units from medical products.
It's important to note that cost should not be the top deciding factor for a relocation. Instead, health and social relationships should take priority. Financial planning software can help estimate how much more you can spend per month if you move to a lower-cost area. A free version of the financial planning software is available for access.
In part two of the article, we will discuss the most important cost considerations in more detail. Meanwhile, it's worth remembering that a smooth transition involves careful planning and consideration of various factors beyond just cost. A good family friend who relocated from Maryland to Texas found that replacing their network of doctors was harder than expected, highlighting the importance of considering healthcare facilities and providers in your new location.
The Kiplinger Building Wealth program features financial advisers and business owners who share retirement, estate planning, and tax strategies to preserve and grow wealth. By following their insights and considering the factors discussed in this article, you can make an informed decision about your retirement relocation.
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