In case you have not noticed, the weather has now gone full "summer" in Kansas and in Missouri.
It is hot, but at least it is humid!
When summer hits these parts I invariably hear some of my fellow midwesterners talk of leaving these parts for cooler, less humid climes.
This is especially true when the conversation veers toward where they intend to spend their retirement years, whether they are looking forward to retirement or are already there.
Regardless, as I have noted in previous blog posts, it is always prudent to look before you leap!
And the weather pattern is only one consideration when it comes to where to spend retirement.
In fact, climate is not even among the top six retirement relocation considerations identified in a recent Morningstar article.
The article, titled “6 Questions to Ask Before Relocating in Retirement,” propounds points to ponder pre-relocation in retirement.
While you will want to read the full article, here are a few of the highlights:
Should I downsize?
This depends on how many visitors you plan to have and how often.
Are you moving far away from family? If yes, then you may not expect as many visits.
Also, if you sell your home and buy a less-expensive home, you will probably be able to add the difference (minus fees and other expenses) to your retirement fund.
What's the cost of living at the new location?
You have to consider the total cost of living. Look beyond taxes and include expenses like health care, food, and transportation.
Real estate prices in popular cities like New York and LA are usually higher than in smaller cities or college towns. Consequently, you need to consider the full impact of all costs of living budget.
Look at the total outlay.
Depending on your desired lifestyle (remember the three rules of real estate*), you may opt to downsize to a smaller space in a big city with arts and entertainments aplenty. On the other hand, you may opt for a lateral transition with the same space to a quiet country manor outside a quaint little village.
Look at all of the expenses. Adjust accordingly.
How will relocating impact my cash flow in retirement?
Just as you planned your household budget during your working years, what you "keep" is as important as what you "make".
Keep an eagle eye on the effects of taxes and inflation on your budget projections.
Did you know some states have no state income tax rates?
These tax havens include Alaska, Florida, Nevada, South Dakota, Texas, and Wyoming.
Your CPA can help you evaluate the tax practices of these states because there are important variations. He or she can help you analyze your likely after-tax cash flow in each place under consideration.
Run the numbers.
Are there going to be estate planning concerns?
Relocating and establishing residency in a new state means new laws, to include those impacting your estate.
Seek the counsel of your estate planning attorney.
He or she can help you determine whether your estate would be subject to higher taxes and/or greater restrictions in a new location.
Some key questions: Does the new state have an inheritance tax? How will the new state value your assets? Will your surviving spouse be protected from taxes there?
Will relocating improve my quality of life?
So, will you be able to maintain or enhance your quality of life if you relocate? Will you be happy living farther away from your friends and family?
These are big questions only you and your loved one's can resolve.
Ultimately, the decision to relocate really comes down to whether you can afford it and whether it will make you happier.
For midwesterners here in Kansas and Missouri, the sweltering summer is followed by some pretty spectacular autumn days of Indian Summer.
I, for one, would really miss those.
Even in summer, there is no price tag on watching Kansas wheat waving in the wind at dusk.
*Location, location, location.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Morningstar (June 7, 2015) “6 Questions to Ask Before Relocating in Retirement”
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