Money Matters Should We Stay, or Should We Go?

 Most people assume that once you hit retirement, it’s time to pack up and move someplace sunny. But surprisingly, many American seniors aren’t interested in straying too far from home. I recently read an article in AARP magazine that three out of four retirees do not relocate when they retire, much to their detriment. A recent survey from The American College of Financial Services found that number to be closer to 83 percent of retirees or near retirees have no plans to relocate in their later years. I was shocked how high that percentage was when there is a plethora of good solid information out there that discounts that misguided notion. In today’s world, people at the age of retirement, (for simplicity I will use the age of 62-years old, i.e. when people can start receiving their Social Security benefits.) should seriously consider relocating to a place where costs of living are less but the actual quality of life may be better. There are numerous articles, reports, etc. that near retirees can draw upon to give them the knowledge and confidence to make this type of move. The answer that near retires gave was they are comfortable and don’t want change, i.e. they weren’t interested or did not understand yet the financial implications of living on a fixed income in a location where costs are indicative of their higher wage years of income.
While staying put in retirement has some personal upsides, it’s not without certain drawbacks. If you’re contemplating whether you should stay or go once you retire, it helps to look at it from both angles.
A near retiree simply must do their homework and look at the key components in deciding whether a move is warranted.
• Taxes – income, property, and sales taxes
• Cost of Utilities – Electricity, Water, Gas, Cable/Internet, etc.
• Food Costs
• Automotive Costs – DMV fees, Insurance, Gasoline, etc
• Misc. Expenses – Restaurants, Movies, Tickets, etc.
• Healthcare
• You live in an area that does not have affordable health care that’s something else to consider in making a move.
Here are some “numbers” that I considered before we decided to relocate when we retire.
• Property Taxes – .75 percent less
• Sales Tax – 3.75 percent less
• Automotive Costs – DMV slightly lower, insurance almost 40 percent lower, and gas a $1 less a gallon
• Food Costs – Fresh food products are an average of 35% less.
• Misc. Expenses – Movies 40 percent less, Restaurants 20 percent less, College Football Tickets 65 percent less (Hint: And I can still see USC play)
• Utilities – Across the board over 25 percent less
• Housing Expense – We’re doing a Reverse Mortgage, so we will not have a mortgage payment!
None of these issues arose by the people that were surveyed that I previously discussed.
Moving in retirement has its advantages if it allows you to hang on to more of your nest egg. Trading in life in the big city, such as the Los Angeles, for a more rural setting, for example, can reduce the amount you need to maintain your expenses each month. Moving to a state with low taxes may also be worth considering if you’ve built up a sizable amount of retirement assets that will be taxed as you withdraw them.
Bottom Line: Whether or not you should move in retirement ultimately depends on several factors, including your current income and spending, as well as what you project your income and spending to be once you’ve left the daily grind for good. Crunching the numbers to see if a move would save you money or take more of a toll on your savings can help if you’re on the fence.
Talking to a financial advisor can be helpful as you assess your financial situation to make the right decision for your retirement. For more information, please call Douglas J. Sedam at 1-866-549-3900, 661-295-2400 #1 or email: Doug.Sedam@ThePaseoGroup.com. You may also learn more at www.ThePaseoGroup.com.
Securities and Investment Advisory Services offered through Western International Securities which is a member FINRA/SIPC. OSJ Office: 19510 Ventura Boulevard #211 Tarzana CA 91356 818-996-3375 The Paseo Financial Group, Inc. and Western International Securities are unaffiliated companies.