Where You Live as Re­tiree Can Af­fect Fi­nan­cial Strate­gies

Calhoun Times - - BUSINESS NEWS - De­wayne Bowen

be aware that where you even­tu­ally de­cide to live can greatly af­fect your sav­ings and in­vest­ment strate­gies – both now and dur­ing your re­tire­ment.

Here are some re­lo­ca­tion costs to con­sider:

- Hous­ing – Not sur­pris­ingly, the larger the city, the more ex­pen­sive the hous­ing is likely to be. Also, lo­ca­tions near an ocean or the moun­tains tend to be more costly. But the type of hous­ing you se­lect – house, apart­ment or con­do­minium – also can af­fect your fi­nan­cial pic­ture in terms of ini­tial ex­pense, main­te­nance and pos­si­ble tax ben­e­fits. Plus, you can now find newer types of ar­range­ments, such as se­nior co­op­er­a­tive hous­ing, in which you own a share of the com­mu­nity and have a voice in how it’s run.

- Health care – If you are 65 or older when you re­tire, you’ll have Medi­care to cover some of your health care costs, though you’ll still likely need to pur­chase some type of sup­ple­men­tal cov­er­age. How­ever, out- of- pocket health care ex­penses may vary in dif­fer­ent parts of the coun­try, so this is some­thing else you’ll want to check out be­fore re­lo­cat­ing. Of course, the avail­abil­ity of good med­i­cal fa­cil­i­ties may be just as im­por­tant to you as health care costs.

- Taxes – You may hear about peo­ple mov­ing to a dif­fer­ent state to lower their tax bur­den dur­ing re­tire­ment. A few states don’t have per­sonal state in­come taxes, and many oth­ers of­fer fa­vor­able tax breaks on re­tire­ment in­come, so, if taxes are a ma­jor con­cern, you’ll want to re­search the tax sit­u­a­tion of prospec­tive re­tire­ment lo­ca­tions. You may also want to con­sult with your tax advisor.

These aren’t all the ar­eas you will need to con­sider when es­ti­mat­ing your to­tal cost of liv­ing in a re­tire­ment des­ti­na­tion, but they should give you a good idea of what you can ex­pect. And your choice of where to live as a re­tiree can af­fect your fi­nan­cial strat­egy in at least two ways: how you in­vest to­day and how much you can with­draw from your re­tire­ment ac­counts when you’re re­tired.

Re­gard­ing how you in­vest to­day, you should eval­u­ate whether your cur­rent in­vest­ment strat­egy is likely to pro­duce the re­sources needed to sup­port you ad­e­quately in the re­tire­ment lo­ca­tion you’ve cho­sen. So, for ex­am­ple, if you think you’re go­ing to live in a fairly ex­pen­sive place, you may need to re­duce your ex­penses, de­lay re­tire­ment or work part time.

Your choice of a re­tire­ment des­ti­na­tion also may af­fect how much money you with­draw each year from your 401( k) and IRA. When choos­ing an ap­pro­pri­ate with­drawal rate, you’ll need to con­sider other vari­ables – your age, the amount of money in your re­tire­ment ac­counts, other avail­able as­sets, etc. – but your cost of liv­ing will be a key factor. A fi­nan­cial pro­fes­sional can help you de­ter­mine the with­drawal rate that’s right for you.

When you re­tire, it can be a great feel­ing to live where you want, but you’ll en­joy it more if you’re fully aware of the costs in­volved – and the fi­nan­cial steps you’ll need to take.

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