If you're one of the millions of Americans with too little savings for retirement, it's important to act quickly once you've left the workforce. You don't want to run through your money too fast and be left broke in your later years, so you need to reduce your costs of living right away. There's lots of ways to live on less, but relocating could be one of the single most important steps to take to salvage your retirement savings.
Relocating to the right place for retirement could allow your money to stretch much further, for a few big reasons. Here are four important ways relocating could help you make your money last.
1. You could reduce your tax burden
Throughout the United States, there are huge differences in how you'll be taxed according to the state where you live. In New York, for example, the total tax burden for residents was estimated at 12.97% in 2019 according to a WalletHub report. In Delaware, on the other hand, it's just 5.55%. This calculation takes into account property tax, income tax, and sales and excise tax.
Seniors could be even more affected than most residents by variations in state tax laws, as some states tax Social Security benefits and pensions while others don't. If you're currently living in a high-tax state and move to one of the most tax-friendly states for retirees, you could keep much more income in your pocket.
2. You could opt for a locale with a lower cost of living
It's not just state taxes that vary substantially across the country -- some states are just a whole lot more expensive to live in when looking at total costs.
States such as New York don't just have high taxes -- healthcare is also very expensive. And depending on where in New York you live, the cost of home ownership or rent can also be much higher than in other locales. You can check out our list of the worst states for retirees and our list of the 15 states with the highest cost of living to find places to be sure to avoid. If you live in a place where everything is expensive, you could significantly reduce the income you need to stay comfortable -- without compromising your quality of life -- by simply moving somewhere cheaper.
3. You could downsize your house
So maybe you don't want to move to a different state just to save money, or maybe you're already living in a state where you don't have a high tax burden. This doesn't mean that you can't reduce your costs and make your money stretch further by relocating. You could still save on costs if you downsize your living space, especially if you're in a large and expensive home or apartment.
Many people buy big houses or have lots of space when they have kids at home, but don't really need that much room during retirement. A big space also means more rooms to take care of, which you may not want to deal with when you're trying to enjoy life as a retiree.
If you downsize to a cheaper -- and perhaps smaller -- place, you could likely save not just on your rent and your mortgage and property taxes, but also on a host of other costs too, including utilities, furniture, and household help. Not having to pay the lawn guy every two weeks or cover the costs of air conditioning 3,000 square feet all summer could reduce the income you need by a lot so you can keep more money invested for the future.
4. You could move to a walkable area
Moving to a more walkable locale could also be a huge savings. Not only could you reduce the cost of the gas it takes you to go places, but you could perhaps even get rid of your car entirely.
AAA estimates the annual cost of car ownership at around $8,849 in 2018. If you could opt out of vehicle ownership, you could keep almost $9,000 extra invested rather than drawing from your limited savings to cover the costs of your vehicle. And if you and your spouse each have a car, you could double that savings.
With ride-sharing services so prevalent in most places, it's easier than ever to forego vehicle ownership if you live in a walkable area. Even if you go without a car only for a short while, this would still give you the chance to preserve as much of your savings as possible. If you get used to living without a car, though, you can maintain your independence for much longer, as many seniors end up struggling when they eventually get too old to drive -- and you won't have to if you've perfected a walkable lifestyle.
Relocate quickly if you need to salvage your savings
As you can see, there are lots of ways that moving could save you a fortune. When your retirement nest egg is too small, taking action quickly is imperative to avoid drawing down your investments so much you no longer have enough to live off in the future. Start looking into downsizing as soon as you realize you're likely going to end up retired with too little cash for a comfortable life -- acting quickly to preserve your funds could make all the difference.