Alliance America Logo Contact About Us Articles Home
person holding hands out with a GPS map in hands

How to decide where to live in retirement?

by Alliance America
August 30, 2023


Retirement represents a significant life transition, and one of the most pivotal decisions associated with it is where you will live. The ideal retirement location can vary widely based on individual preferences, needs and circumstances.

Retirement isn't just a financial or occupational milestone; it's a profound life transition, marking a distinct shift from decades of work routines, daily commitments and a defined sense of purpose. When one enters the realm of retirement, it brings forward an opportunity to redefine yourself, prioritize personal well-being and essentially embark on a new chapter of life.

For many, retirement is synonymous with freedom — freedom from the alarm clock, stringent work schedules and, in many cases, freedom from a fixed location. However, this newfound liberty also ushers in one of the most pivotal decisions: where to spend the golden years of life.

Finding the perfect retirement spot is akin to seeking the right fit for a jigsaw puzzle; the piece has to be just right, fitting seamlessly with individual preferences, needs and unique circumstances.

What are the top concerns of retirees?

pile of money with a magnifying glass on George Washington's face

When navigating the decision of where to live in retirement, there are a multitude of factors that can influence this decision. While the top concern can vary based on individual circumstances and preferences, there is one factor that frequently rises to the forefront of this decision-making process: financial security.

Retirement often spans decades, so ensuring that your savings and financial resources can accommodate not just immediate desires but also long-term needs is crucial. The cost of living in the chosen location of your retirement dwelling directly influences how far a retiree's savings will stretch.

Aging inevitably brings about unexpected expenses, primarily related to health care. Living in an area with a more manageable cost of living can provide a financial cushion for these unplanned costs.

The cost of housing, whether renting or buying, is typically one of the most significant monthly expenses. An affordable housing market can free up funds for other activities or necessities in retirement.

Some areas, whether states or countries, offer tax benefits for retirees, including not taxing pension income or providing property tax discounts for seniors. Such tax breaks can significantly influence the longevity of one's retirement funds.

For retirees who wish or need to continue working in some capacity, the local job market and potential for part-time employment or consultancy can be vital. A location that offers such opportunities can enhance financial security.

Considering potential future needs, such as assisted living or long-term care facilities, is essential. The cost and availability of these services in a given area can influence one's financial planning.

While financial security often emerges as the top consideration, it's essential to remember that the best decisions usually arise from a holistic evaluation. Factors such as proximity to family, health care quality, climate preferences and lifestyle opportunities should also be weighed in the balance. After all, retirement is not just about making ends meet but also about enjoying a well-deserved, fulfilling and comfortable life phase.

How do taxes impact retirement?

Depending on the state's tax policies, a retiree could either find their savings stretching further or depleting faster. For those living on a fixed income, this can be the difference between a comfortable retirement and a financially strained one.

The majority of retirees rely on Social Security benefits as a significant portion of their income. While the federal government might tax up to 85% of your Social Security benefits depending on your income level, there are several states that do not tax Social Security income at all. Living in such a state can make a substantial difference in net income.

Similar to Social Security benefits, some states offer tax exclusions on pensions or other retirement income. This can be a massive boon for retirees, especially if they've accumulated substantial pension benefits over their working years.

Beyond income taxes, it's also crucial to factor in property taxes if you plan to buy a home, or sales taxes which can affect daily living costs. Some states might have no income tax but high property or sales taxes, which could offset potential savings from the absence of income tax.

For those concerned with legacy planning and bequeathing assets to heirs, understanding estate or inheritance taxes in a particular state is vital. Some states impose these taxes, which can significantly reduce the amount left for beneficiaries.

Accurate tax planning can help retirees forecast their future financial health more accurately. This foresight is invaluable in making informed decisions about spending, investments and other financial commitments.

Taxes can indirectly influence the quality of life. For instance, states with higher taxes might offer better public services, infrastructure or amenities. Conversely, states with lower taxes might have fewer public services but allow for more personal spending flexibility.

It's worth noting that low or no taxes aren't the only parameters for choosing a retirement location. Health facilities, proximity to family, community life and climate might override tax considerations for some retirees.

Indeed, as retirees transition from earning a regular income to relying on savings, pensions and benefits, the tax landscape of their chosen place of residence becomes a crucial determinant of their financial health. Taking the time to research and understand these implications can set the stage for a retirement that is both financially secure and fulfilling.

How do housing costs impact retirement?

representation of a house and money balanced on a popsicle stick

Housing, both as a fundamental need and as a significant expenditure, plays a central role in shaping the retirement experience. The place you call home during your golden years can influence not just your financial health but also your quality of life. As such, understanding housing costs in your desired retirement location becomes paramount.

For many retirees, housing costs – be it rent or mortgage payments, property taxes, maintenance or homeowners' association fees – often represent the largest single monthly or annual expense. As a fixed cost, it's largely non-negotiable and can eat up a significant chunk of a fixed retirement income.

For homeowners, the house is often their most valuable asset. The equity tied up in the property can be seen as a potential source of funds, whether through a sale, reverse mortgage or as collateral. Its value can significantly impact a retiree's financial flexibility.

Beyond just the cost of acquiring or renting a property, different locations have varied utility and maintenance costs. A larger home in a colder climate, for example, might have hefty heating bills, while a house in a coastal area might require frequent maintenance due to saltwater corrosion.

Some desired retirement locations, such as beachfront properties or homes in gated senior communities, come with a price premium. While they offer a unique lifestyle, it's essential to balance this against the available retirement budget.

How can downsizing the home save money?

For many, their family home might now be larger than what they need in retirement. Selling a larger home and moving to a smaller property can release a substantial amount of equity. This infusion of funds can be used to bolster retirement savings, invest or fund other activities.

A smaller home usually means lower utility bills, less maintenance, reduced property taxes and potentially cheaper insurance. This can result in significant monthly savings, freeing up funds for other retirement pursuits.

Beyond the financial implications, downsizing can also offer a simpler lifestyle. Less space means less to maintain, clean and worry about, allowing retirees to focus more on enjoying their retirement. Downsizing also provides an excellent opportunity to reassess your location. Retirees might want to move closer to family, to a place with a better climate or to a location with a lower cost of living.

The funds freed up from downsizing can be reinvested into lifestyle enhancements, whether it's traveling, taking up new hobbies or even relocating to a community with more amenities and activities for seniors.

What are your priorities for retirement?

You should live in a place where you can pursue your interests in retirement. Start by making a list of activities you enjoy or wish to take up in retirement. It could be golf, hiking, art classes or beach activities. Ensure your chosen location supports these interests. If community and social engagement is a priority, check if there are clubs, groups or communities you can join. Social engagement is vital for mental well-being in retirement.

Proximity to family and friends is another priority for retirees. You should consider how easy or difficult it might be to visit family and friends from your new location.

Climate and environment play a role in deciding where to live. If you prefer sunny skies or wish to avoid snowy winters, climate can be a crucial factor. Also be aware of areas prone to hurricanes, earthquakes or other natural disasters. These can impact insurance costs and your overall comfort.

Why is location important?

Your health and mobility might change over time, so choose a location that can accommodate potential future needs, such as single-level housing or proximity to specialized health care.

Deciding where to live in retirement requires thoughtful consideration of various factors. It's more than just picking a sunny locale or a place with a picturesque view. By weighing each of these elements and possibly consulting with a retirement planner, you can make a choice that ensures your golden years are both comfortable and fulfilling.

Indeed, housing is more than just a roof over one's head during retirement; it's a crucial financial and lifestyle decision point. A well thought out choice, considering both housing costs in the desired location and the potential benefits of downsizing, can pave the way for a more secure and enjoyable retirement.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

A mother reading a book with her daughter

Your legacy is vastly more than an amount of money left to your surviving beneficiaries. Part your legacy can be the example of a life well-lived that’s achieved through proper planning.

A senior couple stressed over tax liabilities

Too many people enter retirement with burdensome mortgages, car payments and credit-card debt that they’ve amassed during their working years. Proper management of these liabilities is fundamental to your current and future financial viability.

A daughter hugging her mother

Financial planning often is motivated by our love for our life partners, children, family members and friends.

Using a calculator to calculate taxes

Taxes have a significant impact your finances and can siphon assets unless you have a prudent approach to meet your objectives.