If you’ve lived in a northern state and you’re approaching retirement, the dream of moving to a sun-kissed state with low or no state income taxes has probably crossed your mind at least once. Or maybe you’re a southerner with dreams of snow-capped hills for a holiday retreat. Whatever your circumstances may be, moving in retirement is a big decision, regardless of whether your new home becomes a part-time escape or full-time abode.
Before you pack your belongings into a moving van, consider these hidden costs of moving in retirement.
1. Strict Residency Requirements
Many snowbirds spend a majority of the fall and winter in warmer states and head north during the more temperate spring and summer months–and their schedule is highly dependent on each year’s unique weather patterns. The problem with leaving this decision to the whims of Mother Nature is that many residency laws require you to be physically present in the state for a specific number of days in order to be considered a resident, or, conversely, not be there to avoid becoming a resident. And it’s not enough to simply “say” you live there; you have to be able to document it. You’ll likely need to change your driver’s license, car and voting registration, homestead status, and mailing address to the new state, as well as establish bank accounts in a local branch, and even save receipts from any local purchases.
2. State Taxes
While several states boast lower or no income taxes (in addition to lower or no estate taxes), that’s not the end of the story. States need to generate tax revenue somehow, and hefty property taxes are often a primary target. Additionally, your new state may assess sales tax at different rates and on different items that can increase your living expenses in unexpected ways.
3. Selling Your Old Home
Chances are it’s been a while since you sold a home. While realtor’s fees are often top of mind, don’t forget the cost of staging your home, completing various touchups or renovations to increase market value–not to mention the hassle of “showings” and the risk that your home may sit on the market for much longer than expected. Are you prepared to pay two mortgages at the same time or delay your retirement dream until your home sells?
4. Buying and Outfitting a New Home
If you’re moving to an unfamiliar area, you may want to rent before buying so that you can better understand the lay of the land. By paying rent, you won’t get the tax break you do with a mortgage, but it may help you make a more informed decision about where you want to be in your new town. If you decide to buy, don’t forget about potential transaction fees and the costs of buying a new home. It’s likely that you’ll want to buy new furniture and possibly renovate the new home to fit your lifestyle.
5. Travel Expenses
If you ultimately choose to move far away from your loved ones but still want to be highly involved in their lives, you’ll need to factor in additional travel expenses. Plane fares, gas prices and hotel stays can vary greatly–and add up fast. Plus, while you may be willing to travel to visit your family, remember that they may not have the resources to come visit you.
6. Health Care Costs
Having a network of health care providers that you know and trust is important throughout your life–and the need only grows in retirement, including the increased chances of needing long-term care. Inevitably, you’ll need to tap into the knowledge of more specialists to address certain health issues. Are you ready to try out a new primary care physician? Can you afford to work with several caregivers until you find one with whom you are comfortable?
7. Emotional Costs
This is unquantifiable, yet immensely important. Prioritize your values when weighing the pros and cons of a move. If family is a priority, are you prepared to live far away and potentially miss out on memory-making moments like dance recitals, basketball games, birthdays and even holidays? If you value community, are you ready to leave your social network and make an entirely new batch of friends and acquaintances? Don’t underestimate the importance of your existing connections. Leaving them behind can lead to a less enjoyable experience, especially if you are not adventurous when it comes to making new connections.
Before making your big move, discuss this list with those who are emotionally and financially involved in your life to ensure you have both subjective and objective feedback. It could also be a good idea to discuss your moving and retirement plans with your advisor, since they’ll be able to highlight unexpected costs that you might not have considered. Then you can make a responsible decision that makes this new adventure the dream you always imagined.