Retirement is a time when many people move to their ideal location. Some retirees might wish to move closer to their adult children, to live in a warmer climate, or to live in a state with lower taxes. No matter the cause for moving, it’s important to do your research before you move.
There’s a lot to consider when setting up a move, so let’s get started.
Know The Cost of Living
Retirees have a limited income stream each month, so it’s important that we take into account the cost of living in an area. Bestplaces.net has a great cost of living comparison calculator. To use it, you simply plug-in the city in which you live, your expected income during retirement, and the city you are moving to. The calculator then spits out an estimate of the amount of income you would need to live your current lifestyle in the new city.
Check The Tax Rates
Local and state taxes will vary greatly from place to place. The following are some of the taxes you should consider before moving:
- Income Taxes – Some states have no state income tax and low local income taxes, while others layer on the taxes (I’m looking at you New York City). Most retirees have tax deferred investments, such as 401(k)s and IRAs, which means Uncle Sam taxes their investments at ordinary income rates when they retire. This makes it very important to inspect the income tax rates of a new state before you move.
- Property Taxes – Homeowners should also be aware of the property taxes that the local government assesses. The difference in property taxes between different locations can amount to several thousand dollars each year. It’s important to take this into consideration when selecting where you want to live.
- Sales Taxes – It’s important to balance the different taxes you will be paying in a new location. States with lower income tax rates may have higher sales taxes and vice versa. Sales taxes can be levied at both the state and local levels, which will cause sales taxes to vary across a state.
Verify Estate Planning Documents
Assess your wills, powers of attorney, and other estate planning documents when you move. Nearby states may reciprocate legal documents with your state, but more distant states may not. Before you move, make sure your documents are up to date and valid in your new state. Your new state may also title property differently, which will affect the legal handling of any new property you purchase within your new state in the case of divorce or death.
In 2012, the federal estate tax exemption is $5 million. However, many states levy their own estate taxes and may have exemptions that are considerably lower. For example, Maryland’s estate tax exemption is only $1 million, after which you are slapped with a 16% tax. Each state will have its own estate tax laws, so your new state may have different exemptions and rates for its estate tax.
Research The Community
If you are moving to a new state, getting a feel for the area is difficult. Being new to an area, you may not know all the nuances that the locals may know. To get a better look at a community, first check it out via the Street View Service provided by Google Maps. This service gives you a pedestrian’s view of the community. You can learn nearby attractions, bus stops, and businesses. You can even follow the routes they give you to see if the shortest route to the bus stop, is both short and safe.
To find more information about the local businesses and attractions, you should call the local Chamber of Commerce or visit Yelp.com to browse customer reviews of the businesses in the area. A directory of all chambers in the country can be found here.
Take a Test Run
It’s possible to know every specification about your area, but until you live in the new community, it’s difficult to decide if you wish to live there. So, once you have done all of the technical research you need to do, it’s time to get some firsthand experience.
Before you buy a house in your new community, find a rental there or in an area nearby. I’d recommend renting a place there for a period of three to six months. By that point in time, you will likely know much more about the locale and be able to decide whether you’d like to live there permanently.
If you know someone who plans to move to a new state soon, send this along to them using the sharing icons below.