Considerations When Choosing a Retirement State
Where should you retire? Start with these spots.
When it comes to retirement destinations, Americans are looking inward. Into the middle of the country, that is. According to Bankrate's 2014 10 Best States for Retirement list, hot spots like Arizona and Florida are being forsaken for unlikely cold climates like Wyoming, Nebraska, Idaho, and Iowa. The western half of the country is still popular, but people are not going to California or Oregon, they are staying in South Dakota, Colorado, and Utah.
The one coastal state, Virginia, rounds out the list in 10th place, and the rest of the list includes the types of places New Yorkers and Californians often mistake for each other: Iowa and Idaho, Montana and Wyoming, North Dakota and Nebraska.
All of these states may seem like excellent choices for things like low housing prices, low or no income tax or sales tax rates, level of crime in the area, small-town feel, local activities, etc. Whether you or I would want to retire in any one of them is another question.
What Makes a State the Best Place for Retirement
Best retirement spot lists like Bankrate's are helpful because they provide some perspective on what to look for in a retirement destination. Low or no income tax and sales tax and low crime may be more important to you than year-round warm climates. You may prefer a small-town feel but still want to be close to an economic hub. If you plan to be a social butterfly in retirement, you may be looking for a retirement hot spot.
It is more important to consider the things that are important to you. They may be available in faraway states or nearby to where you live now. You may have a perfect retirement spot in mind that would never make a national list. Before you decide, think about the following:
A lot of the places on Bankrate's latest list have cold, snowy winters. If you enjoy the change of seasons, this may be just fine. If you have spent your working life in a sunny climate, retirement is probably not the time to change.
Cost of Living
This is where the unexpected states make a lot of sense. Since most retirees can't help but watch their dollars, living in a region where prices are low can have a real impact on the quality of life. Payscale.com's free cost of living tool lets you compare cities side by side.
For many of us, the great thing about retirement is the extra time to spend with family and friends. If that's your thinking, it makes sense to favor retirement spots that make family time easier. (Sometimes babysitting money can supplement your retirement income, too.) If you do move away from loved ones, remember to factor in travel costs into your annual spending plan.
A big part of dollar stretching is finding an affordable place to live. The trick is to find a way to downsize your mortgage without necessarily downsizing your space or amenities. Often, that means finding an area where the housing is less expensive across the board (these places typically offer a lower cost of living as well). Trulia.com is a great place to research home prices.
Some people love their cars, but there is a certain feeling of independence to knowing you don't need one. Further, as we age, driving may not be as easy (and traffic may not be as tolerable). A place with great public transportation options can be very important to some retirees.
More than half of the US states offer some sort of retirement tax breaks, if not a state tax break altogether. I like Kiplinger.com's interactive state tax map for figuring out which is which. It really makes a difference when you are withdrawing those 401(k) funds whether state tax is due or not, so if you are going to make a move, you might as well make it a tax-favored one.
Don't forget to factor in what you like to do with your time. If you like outdoor sports, gardening, culture, nightlife, even meditation, there are plenty of retirement-friendly spots that cater to your favorite pastime.
If you do decide on a big move, try before you buy. Visit your destination town and try to get to know a few people, it will help you get a better sense of the town's vibe and sense of community. If you are visiting a spot that you found on the list, be prepared for a few grumbles. Charming spots are often the most closely guarded. But it's worth the effort to find the perfect place to retire.