Retirement is a new beginning, a time for you to enjoy the benefits of a lifetime of hard work. Part of that new beginning often involves relocating – a chance for you and your family to discover new adventures and create lasting memories. To help ensure a successful next phase of life, it’s essential to evaluate the practical implications of a relocation, from cost-of-living analysis to strategic tax planning.
At Mercer Advisors, we’ll help guide you through the key priorities for wealth management when relocating in retirement. Our comprehensive resources and expertise will support you during each step of your relocation, helping to ensure a smooth transition to your new home.
Retirement relocation is not simply about moving to a new place. It involves careful thought of key priorities from access to health care to understanding favorable tax environments. My job is to help retirees find a place that meets their logistical, financial, and emotional needs.
The Importance of Understanding Estate and Inheritance Taxes by State
A state’s estate and inheritance tax situation are an important consideration in the relocation process. Where you live will have a significant impact on what your heirs receive and the taxes they may have to pay. Your advisor will help you navigate your relocation decision for more favorable tax environments and maximize the inheritance for your beneficiaries.
Source: Bloomberg Tax; state statutes
Important Considerations – A Guide to Relocating in Retirement
Relocating in retirement is an important decision, emotionally and financially, that should involve comprehensive planning with your wealth advisor. From understanding housing markets to finding a new community, clarifying your options is the first step in making the best decision for you.
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A decision to relocate in retirement is a multifaceted one that involves several considerations ranging from cost of living to maximizing happiness. There are five primary reasons that can ultimately drive people to relocate in retirement:
- Lower cost of living: How far your dollar goes is especially important when you’re retired, and many retirees want to maximize for this by choosing a state with a lower cost of living than their current state.
- Income taxes: Similar to cost of living, income taxes vary dramatically between states. Some states, like Washington, do not have an income tax, while others, like California, have high state and local taxes.
- Estate and inheritance taxes: State-specific estate and inheritance taxes can play a key role in limiting the inheritance you can leave to your heirs. This is an important consideration for many retirees.
- Proximity to family/community support system: Many retirees prioritize being closer to their children and grandchildren when relocating, especially since they often have more free time in retirement.
- Lifestyle preferences: Retirees want to enjoy the benefits that many residences and communities offer, from landscaping to fitness facilities, having these available is often part of the decision-making process for an enjoyable retirement experience.
As wealth advisors, our role is not just to optimize for the financial decisions of relocating in retirement. Rather, it’s to be your partner and help you find the right place for your retirement relocation needs.
We often tell our clients to do a “test drive” of a new location and rent for a season before committing to purchasing. This is an ideal way to understand if you will enjoy living somewhere for a longer period. Ask yourself – do you like the people? Do you like the weather? Will you have access to healthcare facilities to manage your health needs? The key to a successful relocation is conducting thorough due diligence.
Other key priorities your wealth advisor will help you navigate are whether it’s a good idea to sell or rent out your current home to maximize income and have favorable tax implications. Similarly, we help you decide if you should rent or purchase in your new location. If you do decide to purchase, we will help you with financing decisions and connect you with a reputable local real estate agent and lender. We provide tips for maximizing tax savings when living between multiple locations. We’ll help you determine whether it’s advantageous to establish residence in a new state and, if so, provide guidance for doing so.
Relocating in retirement is a significant life decision. At Mercer Advisors, we can help you recognize and address the financial and emotional aspects of relocating in retirement to ensure confidence and overall well-being for you and your family.
A State-by-State Guide to Making Your Retirement Dollars Go Further
Preserving more of your retirement savings is a primary goal of many retirees. Analyzing housing costs, property taxes, insurance, and the overall real estate market for each state is vital to help ensure affordable long-term living costs aligned with your retirement budget.
Source: ConsumerAffairs, 2023
