Are you thinking of moving in retirement to downsize, to save money, or to move closer to family?
If so, you aren’t alone. According to a study by Merrill Lynch and Age Wave, 64% of retirees have moved, or anticipate moving in retirement and being closer to family members (29%) and reducing home-related costs (26%) are the top two reasons for moving in retirement. Of those who move after 65, about one in six moves to a different state or region.
Before putting a “For Sale” sign on your lawn and making a potentially irrevocable decision, ask yourself these 8 questions:
1, Can you afford to retire in the first place?
With the decline of pension plans in recent years, it can be a challenge to determine whether you’ll have enough monthly income to last a lifetime. According to a recent survey by The Employee Benefit Research Institute, only 21% of workers are “very confident about having enough money for a comfortable retirement and fewer than half have tried to calculate how much they need to save for retirement.
Want to give yourself a retirement reality check? Run a calculation with your financial advisor, through your retirement plan at work, or with a calculator like the AARP retirement income calculator to see how close you come to being able to replace your current income in retirement. (You may not need 100%, once you eliminate some work related expenses. On the other hand, you might need more than 100% if you have big plans to travel in retirement.)
Be sure to run several scenarios, not just rosy ones. Play the devil’s advocate using a variety of tough scenarios —low investment returns, high inflation, and longevity to age 90 or 100. How does your plan stand up?
2. How affordable is your retirement dream spot?
How much does it really cost to live where you are planning to move? Whether you are moving to a new state or just down the street, consider the cost of living where you plan to spend your golden years.
My friends moved to their dream retirement spot in Kona, Hawaii, and loved walking to the beach every morning. But they didn’t love their expensive shopping trips at the grocery and hardware stores.
My grandfather lived in Washington state, where there is no state income tax. Yet he constantly complained about the property taxes and the sales tax, which he felt were high enough to make up for the lack of state income tax. That brings home an important point when considering how affordable a spot is: what looks like a low tax state to workers, might be hard on retirees with their different sources of income.