There are plenty of good reasons to pick up and move once you're retired. Maybe there's an area of the country you once traveled to and think you'll enjoy living in, or maybe you haven't experienced life outside the state in which you raised your family and you're ready to take that plunge now that you're not tethered to a job.
No matter your goal in relocating, be sure to account for the following potential financial pitfalls before taking that plunge because they could cause you to regret your decision to move elsewhere.
1. A higher cost of living
The idea of spending your senior years on a California or Hawaii beach may seem appealing. But remember, the cost of living in these states is considerably higher than it is in the rest of the country. Before you relocate in retirement, do some research on what living in your target state actually means from a financial perspective. Specifically, you'll want to look at factors like:
- Home prices
- Property taxes
- Income taxes
- Fuel costs
- Food
Additionally, search online for cost-of-living calculators. There are plenty out there that will give you a sense of how expensive one state is versus another so you can make an informed decision.
IMAGE SOURCE: GETTY IMAGES.
2. State taxes on Social Security benefits
You should generally expect to pay federal taxes on some or most of your Social Security benefits if you're not a low-income senior. But some states tax those benefits, as well, and if you relocate to one, you could lose an even larger chunk of that income.
Currently, these 13 states impose a tax on Social Security:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Missouri
- Montana
- Nebraska
- New Mexico
- North Dakota
- Rhode Island
- Utah
- Vermont
- West Virginia
Of these, most offer an exemption for low or even moderate earners, but Minnesota, North Dakota, Vermont, and West Virginia offer no exemption at all.
3. More travel to see friends and family
Relocating for retirement often means putting yourself far away from friends and family. And that could get expensive for a couple of reasons.
First, you'll spend more to travel to see the people you love. Additionally, you may incur some extra costs by virtue of not having people around to help with things like home maintenance or even transportation to and from medical appointments -- things nearby family members would otherwise be able to assist with.
Make sure relocating makes financial sense
Your goal in relocating may be to experience a new locale more so than save money, and that's fine. But before you take that leap, make sure your finances won't take too drastic a hit in the process.
If you go from a moderately priced city or suburb to an expensive one, you may find that your retirement income doesn't go very far. And if you move someplace that taxes your Social Security benefits or puts you far from the people you love, your finances could similarly suffer. Make sure you can really afford your new destination well before you decide to call it home.
