If you’re planning for or approaching retirement, it’s not unusual to think about relocating to where you want to live out your retirement years. With housing and rents at their highest levels in years, many retirees are facing difficult decisions on where they choose to reside. In response, the media has created a cottage industry of “Best Places to Retire” lists based on research into the states with the cheapest housing costs, lowest taxes, and most friendly cost of living to those in retirement.
While all those factors are important, they don’t tell the whole story. Perhaps most importantly, they generally fail to take into account the way most people prioritize family, friendships, and regional ties when selecting their retirement home location.
Retirement decisions are not made in silos. Very rarely do I run into a situation where a client focuses primarily or exclusively on finding the cheapest place to live to get the most from their retirement savings. If that was the case, we would see more people would retire to Mississippi, where housing is 32% below the national average, according to the Cost of Living Index tracked by The Economic Policy Institute.
What I do see are clients downsizing by reducing their square footage and relocating to neighborhoods that do not have costs associated with necessities for young families, like a top-notch school system or extensive community amenities. However, in my experience, very few retirees are willing to sacrifice proximity to loved ones. Instead, they reduce spending in other areas like travel or entertainment to make a preferred location work.
That said, if a retired couple is willing to make drastic relocation decisions in the name of stretching their retirement dollars, it may be worth considering retiring abroad. The number of Social Security recipients living abroad has tripled in the last 15 years and some countries are easing their visa requirements to take advantage of this trend. The annual global retirement index rates the top five countries to retire as Spain, Panama, Mexico, Portugal, and Costa Rica. Major expenses such as health insurance and housing can be much more affordable outside the United States, as well.
Whether you are staying within the continental US.. or decide to move abroad, there will always be a need for careful planning and preparation to maximize your retirement resources. You should consult with your team of professionals, which include a wealth advisor or financial planner as well as a good accountant to put together a plan that will work for you.
In summary, it’s normal to reevaluate where you want to live in retirement, but it’s important to work closely with your advisors on this decision to make sure you’re accounting for all the factors in your own personal situation that matter most to you. After all, most lives are more complex than just a list of housing cost figures in a magazine.
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