Does It Matter Where You Retire?

Whether You Stay or You Go, it Does Matter Where You Retire

senior couple standing in front of home
Yes, it matters where you live in retirement. (c) Getty Images

Does it matter where you retire? The short answer is: Yes, it does.

Whether you retire at 65 or 85, the same factors will affect your quality of life: financial stability, affordable housing, access to health care, access to transportation, weather, the convenience of shopping and recreation, employment opportunities, community support and safety, social engagement, and access to family and friends.

The order of those priorities differs from person to person.

We all strive for longevity, so the more a retirement location promotes and accommodates these factors, the more likely we will enjoy and savor our golden years.

Retirement has become a more elusive, if not elastic, concept than it was just 20 years ago. Most people feel insecure about personal savings for retirement and an increasing number retire later or rejoin the workforce after retirement. Before the housing crash of 2007, many hard working baby boomers had accumulated a substantial nest egg for living out their retirement dreams. Unfortunately, the great recession tarnished some of those golden eggs and made the notion of “comfortable retirement” more of a myth to subsequent generations. Confirming these financial challenges, the Social Security Administration predicts Medicare insolvency by 2030 and the Congressional Budget Office predicts exhaustion of Social Security benefits by 2032, at present funding levels.

Location Determination

Given this economic reality, prospective retirees should prioritize finding affordable housing in a low cost of living area. For seniors priced out of their present home or unable to live with family, a retirement community could be the optimal destination. Retirement communities vary depending on a retiree’s particular needs and activity level.

There are retirement communities for active adults, independent living, continuing care, assisted living, nursing care, and Alzheimer’s care. Communities catering to age 55 and over are growing.

Zeroing in on an affordable retirement location requires striking a balance between cheap and safe.  The Bureau of Justice Statistics’ most recent data (2003-2013) send a positive message about crime against the elderly. The good news is elderly homicides dropped 44 percent since 2011 and compared to other age groups, people over 65 experience the lowest rates of violent crime. Also good -- the rate of property crimes against the elderly dropped 48 percent since 1994. Incidentally, 97 percent of all crimes against people over 65 are property crimes. Seniors living in urban areas experienced higher rates of crime than seniors living in the suburbs.

The Least Expensive Cities to Live 

Forbes ranked the top 10 cheapest cities by cost of living in 2015 (cheapest listed first): Birmingham, Knoxville, Buffalo, Oklahoma City, Cincinnati, Memphis, St. Louis, Dayton, Indianapolis, and Columbus. Some of those cheap cities are safer than others (for whatever it’s worth, neighborhoodscout.com gives Columbus and Oklahoma City a safer crime index).

Forbes also ranked the top 25 best cities for retirement in 2015 (best listed first): Abeline, TX; Asheville, NC; Athens, GA; Blacksburg, VA; Boise, ID; Bowling Green, KY; Cape Coral, FL; Casper, WY; Colorado Springs, CO; Columbia, MO; Fargo, ND; Great Falls, MT; Huntsville, AL; Lexington, KY; Lincoln, NE; Logan, UT; Mesa, AZ; Oak Grove, OR; Pittsburg, PA; Port Charlotte, FL; Raleigh, NC; Rochester, MN; San Angelo, TX; San Marcos, TX; Tucson, AZ. All of these top retirement cities have safer crime indexes than any of the cheapest cities (find information like this at neighborhoodscout.com).

US News & World Report ranked the top 50 affordable places to buy a retirement home in 2015. According to its data, the most affordable place for seniors to own a home is in Wheeling, WV, where they pay a median monthly mortgage of $764, or $298 in property taxes if their home is paid off.

 Neighborhoodscout.com estimates you have a 1 in 204 chance of being a violent crime victim in “affordable” Wheeling compared to the greater 1 in 74 chance you have in “cheap” Birmingham.

Taxes are also a factor in choosing where to retire. Retirees should weigh the differences between a state with no property tax but higher sales and income taxes and a state with no sales tax but higher property and income taxes. Delaware, Oregon, Montana and New Hampshire do not impose any sales tax. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming do not have the income tax. However, New Hampshire and Tennessee require tax payments on investments and dividends. To offset the lack of income and sales taxes, New Hampshire maintains high property taxes and Tennessee imposes high sales taxes to offset the lack of income taxes. Generally, most states offset any absence of revenue in one area by increasing fees in another. In evaluating these differences, a retiree must consider the impact -- for example -- as a homeowner, that a particular state's property tax will have on their finances.

Considering all of the above, Oak Grove, OR would suit me just fine.

On a Personal Note...

My mother lives in New Jersey, a state with the highest property taxes in the nation. It is one of five states that imposes a 7 percent sales tax (California wins at 7.5 percent). It has one of the highest income tax rates at 8.97% for those who earn over $500,000.  On the bright side, New Jersey doesn’t tax gasoline, or clothing, or unprepared foods, or medicine, or household paper goods.  So there's that. Nonetheless, New Jersey is ranked among the ten least tax-friendly states for retirement.  And although New Jersey boasts a few nice towns (I happen to live in Princeton), none are hailed for retirement.

Mom retired at age 66. She began saving for retirement in 1988 when she was executive director of a nonprofit. That employer did not offer a pension or any retirement plan so she invested in an IRA (Individual Retirement Account). She maintained the IRA until after she retired. Periodically, throughout her career at various nonprofits, she tapped into the IRA to supplement her income. She was conservative in her investments (kept a well-diversified account) so despite yielding smaller returns, she lost less money than most in the 2007 crash.  In addition to the IRA, she retired with a moderate pension from her most recent job. Aside from that, her only other source of income is social security.

Recently, she started feeling the pinch.  Although she maintained perfect credit her whole life, she has never been thrifty or had an affinity for downsizing.  Her shrinking savings triggered thoughts of selling her house. She also began looking for employment. After drumming up a few small consulting contracts, she abandoned the job hunt due to changes in the market.  

The financial pickle forced her to get serious about relocating to a more retirement-friendly state. She visited North Carolina, where she has friends, and was pleased with the quality of life there. She toured several attractive, "roomy" apartments and townhouses and realized she can save a bundle by renting in North Carolina instead of owning in New Jersey. Her house is now on the market and she looks forward to entering the next phase of retirement with lower overhead.  Thankfully, Mom maintains a healthy and active lifestyle.  Her retirement needs do not include extensive medications, assisted living or nursing care. She’s looking for an affordable, lively community that offers culture, education, commerce and access to medical care (particularly holistic medicine). Raleigh, NC tops her list of desirable, retirement-friendly locations. Savings alert: North Carolina doesn’t tax social security benefits!

When I asked Mom what she might have done differently in planning for retirement, she said she would have remained in a previous civil service job until she got vested (10 years). She also would have maintained long-term employment with a nonprofit that offered retirement benefits (the nonprofit where she worked the longest had no such plan). When I asked if she regrets retiring in New Jersey, Mom responded, “I can never regret retiring in a place that is close to my family. Although I have lived other places, New Jersey is home. Unfortunately, this state is not retirement-friendly so I must consider other options.”