Making the Right Move in Retirement: Where Will You Live?
Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.edu
Finding affordable, comfortable, and safe housing in later life is an important component of the retirement planning process. Along with health care, housing costs (especially property taxes) are often among the most expensive parts of a retired person’s budget. Are you planning to “age in place” and continue to live in your current home and/or community or do you want to move to a new geographic location? Either way, it is wise to consider retirement housing needs early on, while you are still working. Whether you stay in the same place or move, whatever you do will be more successful if you take time to plan and do research.
Everyone has similar basic housing needs. How well these needs are met will be influenced by when and where you choose to retire. Below are some helpful questions to guide your decisions:
Affordability- What type of housing can you afford and still have enough money left to enjoy the lifestyle you would like to live? Will your mortgage and/or home equity loan be paid off before you retire? At all ages, it is recommended that monthly hosing costs called PITI (principal and interest on a mortgage, property taxes, and homeowner’s insurance premiums) be no higher than 36% to 40% of monthly gross income. This is a common guideline to qualify for a mortgage and it also applies to current homeowners.
Friendships/Support Groups– Do you look forward to making new friends in a new location, or do you prefer old, established friendships? How important is it to have a strong social support group and live near your friends and/or family? If you choose not to live near family members, do you have long-term care insurance and/or money set aside for support services that may need to be performed by others (e.g., home health aides)?
Safety- Do you feel safe where you are now living or plan to live? Does the community have a low crime rate? How close is the nearest police and fire department and hospital emergency room?
Health- How close will you be to medical facilities? Do you feel comfortable with your present doctor, dentist, hospital, or clinic? Are you willing to give them up and search for new ones?
Environment and Climate– What are your preferences concerning weather, climate, and community size (e.g., urban versus rural locations)? Consider air pollution, traffic, summer and winter temperatures, humidity, rainfall, snow, and ice.
Convenient Floor Plan– Whether staying put or relocating, is the house you’ll live in convenient for your style of living, not only now, but also, as you grow older? Can your home be modified to be handicapped accessible? Are there bedrooms and bathrooms located on the first floor?
Community Services– Will you have easy access to services, programs, and facilities for older adults? Examples include area agency on aging programs, volunteer opportunities, classes and trips for older adults, transportation services, Meals on Wheels, and senior health insurance counseling programs (a.k.a., SHIP).
Community Involvement- Are you active in your community and feel you belong? What will be your status as a retired resident of the community where you live or in a new location? Are there enough leisure and cultural activities of interest to you to meet your needs?
If you are planning to relocate, experts advise using every travel opportunity during your active working years to look for your ideal retirement location. Take trips to other parts of the state, country, and world to look around. Consider whether you want to live in a geographic location with all four seasons or only two. Visit potential retirement locations during their least attractive season (e.g., winter in Maine and summer in Arizona). Talk with friends who have lived in other areas. Contact local chambers of commerce and/or the state Department of Tourism, relocation specialists, and realtors in areas you are considering. Carefully read the information they provide in terms of your needs and interests.
Also talk with both long-time residents and newcomers who live in the area where you are considering moving. What do they like and dislike about the area? Subscribe to a local newspaper for a year or two before moving to a community you like. By doing so, you will learn about the weather and how prices of goods and services compare with those where you live now. You will also learn about recreational, cultural, and social activities, and available government and non-profit agency services, medical facilities, and more.
When in doubt about moving to a new geographic area in retirement, consider renting for a year or two. This way you will have time to study a new location more carefully and decide exactly where in the area you want to live. You might also decide you’d rather “stay put” and continue living where you currently do now. Not having to sell a house in a new location will make it easier to change your mind later, if desired.
Below are some additional retirement housing tips to consider:
• Consider living in a “college town” if you want to move to a new location, Many cities and towns that are home to colleges and universities frequently top “Best Places to Retire” lists. Reasons include attractive features such as good transportation systems, cultural and sporting events, free or low-cost classes for older adults, plentiful restaurants and shopping, and good health care services, especially in college towns with medical schools and teaching hospitals.
• Don’t make a move to a new state until you’ve studied how “tax-friendly” it is to retirees. This includes sales, property, and income taxes, including the taxation of Social Security and pension benefits. By moving from a high-tax state to a low-tax state, retirees can often stretch their income. A helpful resource to compare state taxes on retirees’ income is the Retiree Living Information Web site’s “Taxes by State” data at http://retirementliving.com/RLtaxes.html.
• Do a home safety check to make sure that your house is “elder friendly” whether you are purchasing a new retirement home or you plan to stay put, This includes checking for a number of features including non-skid rugs, bright lighting by stairwells, easy-to grip door knobs and faucet levers, and grab bars and chairs in bathrooms. Fall prevention is very important. Falls are the most common injury among older adults and can result in a loss of mobility and independence and are sometimes a cause of death.
• Take advantage of government programs designed to reduce the property tax burden of older homeowners. One example is homestead exemptions, which lower the assessed value of property that is subject to taxation. In other words, a designated amount of property value (e.g., $25,000) is exempt from taxes. Another type of tax break for older homeowners is homestead credit programs that provide rebates or property tax deductions (e.g., a deduction of $100 or $250 from the amount that would otherwise be due).
• Aim to own your home “free and clear” before retirement. This is especially important if a drop in income after leaving full-time work is expected. To retire mortgage-free, develop a plan. Some people elect to refinance with shorter (e.g., 10- or 15-year) loans while other use a mortgage acceleration strategy such as pre-paying principal or making bi-weekly payments equal to making 13 payments, instead of 12, per year.
• Understand that two basic housing decisions can affect your financial well-being in retirement as much as, or even more than, saving and investment decisions. These decisions are where you’ll live (i.e., geographic location) and what kind of house you’ll live in. One study concluded that “changes in geography and shelter are great surrogates for a lifetime of investing.” The greater the amount of downsizing between current and future housing costs, the less accumulated savings someone will need to live comfortably in retirement. Living costs will be reduced and profit on the sale of a prior home can be invested to provide future income.