Q: I am a newly retired 65-year-old woman who lives alone in New York City. I plan to move to Florida or overseas because the costs are so high. How should I approach the move and other basic questions about my retirement? I don’t know much and need a roadmap! –Tess, NYC
A: Funding retirement is all about trade-offs. There are many variables and they come with vastly different costs. “Explore different options and look at them side by side,” says Leigh Van Heule, national financial planning program manager for BMO Harris Financial Advisors. The idea is to get the best balance of what you want and what you can afford.
First, determine what you can afford. One common rule of thumb is that if you have 70% of your former income in retirement you will be able to live as you are accustomed. Another guidepost is that you will live in similar comfort if by age 65 you have saved eight to 10 times the amount you earned annually your last few years in the workplace. You will have a better chance if you can delay taking Social Security until age 70, which when your monthly benefit maxes out.
To be more precise, determine how much monthly lifetime income you have from a pension, Social Security, dividends, annuities, and drawdown of retirement accounts, rental and other income. Compare that to your expected monthly cash needs in each of your scenarios. This may sound daunting, so Van Heule suggests breaking down the tasks to these four steps.
*Figure out where you want to live. You are already working on this decision. So bravo! New York and many other large cities can be budget busters. You can cut your costs a great deal by moving to Florida, where there is no state income tax, or maybe Utah, Arkansas or Tennessee, where costs are even lower. Find more ideas on Money’s list of best places to retire. Overseas you will find value in places like Costa Rica and Ecuador, though there may be taxes and other financial implications. Other considerations for a move include the crime rate, weather, and available activities, and whether you will rent an apartment or buy a house or a condo. “And what kind of access will you have to health care services,” asks Van Heule. “That becomes increasingly important.”