If you're getting ready to retire, it's important to think about what your later years will look like.

One of the biggest decisions you'll make is where you'll spend that time. While many people simply stay put where they live out of expediency or because family is close by, the reality is that your decision about where you retire can affect you financially in profound ways.

To make the right choice, there are three key questions that should guide your preferences for where to reside as a retiree. 

Senior couple surrounded by moving boxes.

Image source: Getty Images.

1. How does your state tax retirees? 

There's wide variance in the rules for taxes on pension income as well as Social Security benefits.

In some states, you'll be taxed on neither of these common types of retirement funds, while in others you'll be taxed on both. Some states also impose an estate tax that could leave your heirs with less, while others either don't have one at all or have a very high threshold at which it kicks in. 

When you're on a fixed income, every dollar counts, so be sure to understand the tax rules where you live. If they aren't favorable, consider moving to one of the states that gives retirees a break

2. What's the cost of living in your area?

The cost of necessities also varies a lot from one part of the U.S. to the next. If you live in a locale where housing, groceries, transportation, and other expenses are very high, your money won't go as far and you're more likely to shrink your nest egg.

Relocating to a place with a low cost of living can reduce your monthly costs so you can have a higher quality of life while spending less. This can help you make your savings last if you're worried about your investment account balance. 

As a bonus, if you sell a home in an expensive area and move somewhere where property values are much lower, you may be able to go mortgage-free in your new state and potentially use some of the extra profits from the sale of your expensive home to bulk up your retirement accounts. 

3. How good is your access to healthcare services?

It's a sad fact of life that people tend to get sicker as they get older. Good preventative care and skilled specialists can help you stay healthier for longer, respond more effectively when you get sick, and possibly even keep healthcare costs down by catching ailments sooner and treating them more aggressively. 

If your state doesn't have top-notch healthcare services, it may be worth relocating to one that does. Just be sure that once you do, you understand what Medicare will cover -- and what its limitations are -- so you can research Medigap or Medicare Advantage policies to find the comprehensive coverage you need. 

By asking yourself these three key questions, you can get the most value from your retirement money, maximize the chances your savings will see you through retirement, and increase your chances of staying healthy throughout your later years. As you can see, making the right choice about where you'll live can make a huge difference.