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One of the potentially fun things about retiring is that the retiree might have an several options regarding where to live.
The most common scenarios are 1) stand pat and stay in the house the retiree currently occupies 2) sell that house and downsize to a smaller residence in the same area and 3) sell the occupied residence and move out of state.
Obviously, one answer isn’t suitable for all clients. Some may want to stay exactly where they are because they simply love their house or they don’t to deal with the tax implications of selling their house. Perhaps they just want to keep the house to pass it on to their heirs. Likewise, some clients do want to sell to recognize a profit and use that excess capital for any number of things. Travel, long-term care, etc., but they plan to stay in the same area.
Then there are the folks that retire and want to move to a warmer or lower tax state. Advisors in the New York/New England are likely familiar with this phenomenon as they probably have had a few clients that upon retiring, left that region for Florida. With that in mind, WalletHub’s Best & Worst Places to Retire in 2024 is worth a read by advisors and clients alike.
Florida Scores Well, But It’s Not All About Weather
Understanding how WalletHub came to its rankings is important.
“To help Americans plan an affordable retirement while maintaining the best quality of life, WalletHub compared the retiree-friendliness of more than 180 U.S. cities across 45 key metrics. Our data set ranges from the cost of living and tax laws to the availability of activities and the quality of health care,” according to the research firm.
Four of the top five cities on the list and five of the top eight are in Florida, but it’s not all about weather as highlighted by the fact that Minneapolis, Cincinnati and Casper, Wy. are also in the top 10. Five other cities with cold weather, ranging from frequent to occasional are in the top 15. To Florida’s credit, it scored well in the WalletHub poll in terms of cost of living, activities for retirees and healthcare.
Obviously, affordability and access to quality healthcare speak for themselves, but having things to do is important in retirement because studies indicate idle seniors can be more vulnerable to Alzheimer’s and dementia. So on the basis of having things to do, city living could suit some retirees well because on that metric, each of the top cities on the WalletHub list are large or mid-sized metro areas. Think San Francisco, Miami, Washington, DC, Las Vegas and Tampa.
Solving the Retirement Location Riddle
Regardless of where a client opts to enjoy retirement, there are multiple factors to consider, including how much the client has saved for retirement and taxes.
Not surprisingly, the tax issue looms large because as noted above and throughout the WalletHub survey, there are some cities in high tax states that, excluding that factor, are great places to retire. That implies strong planning can go a long way toward helping clients retire comfortably in high tax areas should they so choose.
“Yet, all retirees or soon to be retirees can benefit from understanding the taxation implications of their retirement locations. State rules regarding taxation of pension benefits, social security benefits, long term capital gains, etc. can vary a lot,” Jonathon Ferguson, financial capability specialist at the University of Wisconsin-Madison, told WalletHub. “While choosing the most tax-efficient location during retirement should not be the guiding factor, in my opinion, it should be heavily considered.”
Related: When It Comes to Retirement, Advisors Make Huge Difference