By Faron Daugs
3. Changes from state to state
When comparing your home state to different states, you will need to look at the overall tax and cost burden. Just because a state has low property taxes or no income tax, they can make that up by charging a higher sales tax, charging more for state services, or having a broader tax base for goods and services. These are more discretionary and not as fixed, but they still can eat into any retirement savings.
Another cost that changes dramatically from stateto state is homeowners’ insurance . Annual premiums can change dramatically with average costs being less than $500 in Hawaii to nearly $1,500 in Florida to over $3,000 in Oklahoma. Changing weather patterns in areas recently impacted by storms could drive these costs up over the long-term. Make sure to track not only short-term trends in the state such as cost of living and inflation but also longer-term trends to have a better understanding of potential hidden or unknown costs such as increased hurricane activity or water usage reductions.
4. Hidden costs
Downsizing to a condo could provide a less expensive place to live while putting some spending money back in your pocket. Be sure to take a closer look at the association fees and what they cover when purchasing a condo. Sometimes these can be very costly or may not cover everything you would imagine. You might not be able to make simple fixes by yourself and conversely you might not have control over common areas such as patios or windows. It’s important to note that some condo fees do include water, garbage, and other utilities, which can provide stable costs month-to-month. But costs can, and often do, go up with inflation and there are special assessments for bigger fixes such as a roof.
Popular destinations, like Florida, are known for high homeowners’ association fees with strong deed restrictions. This could be a shock and require an adjustment if you’re not used to dealing with these types of restrictions. There’s also the need to work with condo associations and boards to make sure facilities are maintained or to determine how resources are spent. This isn’t a direct cost but could require time for meetings and negotiations.
5. Proximity
For many, the question of where to retire comes down to two factors: location and family. Having a great time somewhere during a vacation might make that location seem like the best place to retire, but vacation and day-to-day living rarely overlap. Before going to a new location, give it a test run. Rent somewhere that would be a more practical retirement location (the hotel on the beach probably isn’t feasible for most). How long does it take to get into town? What types of services are available to the public? What is the sentiment of the surrounding community? Are there top-rated healthcare systems close by?
The pandemic highlighted the importance of being connected, so don’t overlook the importance of being close to family and friends. Of course, there’s always FaceTime or email and while those are ways to communicate it may not be the best way to stay connected long-term. It’s difficult to put a price on time with friends or watching family members grow.
Whether you’re looking to move a state over or across the country, it’s never too early to start planning. While chasing that dream retirement might be the goal, don’t overburden yourself with taxes, cost of living adjustments, or additional fees that will dampen your retirement years. The best strategy is to plan before your retirement or work with someone that can help you navigate the various financial unknowns that might happen when moving out of state. It’s an exciting new chapter, and with some planning, it can be as fully rewarding as you imagine it to be.
Faron Daugs, CFP, is wealth advisor, founder and chief executive of Harrison Wallace Financial Group .
