When it comes to where they live, retirees no longer need to be near their employers or in top school districts—but the freedom to move virtually anywhere can open the door to retirement destination mistakes. Many retirees discover the hard way that their favorite vacation spot isn’t the ideal place to live in their older years.

Before you pack up and move, give some thought to these five retirement destination considerations that sometimes get overlooked…


1. Your best retirement destination could be closer than you think. Distant destinations hold an exotic allure, of course, but retiring to such places can be expensive…can strain retirees’ relationships with friends and family…and often have drawbacks that aren’t apparent until you actually live there.

One option to consider: Stay in the same general vicinity where you already live, but move to an area that’s less expensive because it doesn’t have an elite school system and is farther from the urban center. These factors are typically less important in retirement. True, you may not have the adventure of exploring a new region…but that new region would have become old hat within a few years.


2. State income tax rates don’t tell the whole story about retirement-relocation taxation. Articles recommending retirement destinations often extol the states that have no state income tax such as Florida and Texas. While a state’s income tax rates are an important consideration, there are other tax matters worth weighing, including…

How retirement accounts, pension payments and Social Security benefits are taxed. Some states that tax most types of income don’t tax certain forms of retirement income. Examples: Illinois, Iowa, Mississippi and Pennsylvania don’t tax most retirement-plan distributions and pensions. But there are states that tax Social Security benefits as well as earned income, including Colorado, Connecticut (which taxes benefits above a certain amount), Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont.

Sales taxes. This gets less attention than income taxes, but sales tax can take a big toll on retirement budgets. California, Indiana, Mississippi, Rhode Island, Tennessee, Minnesota and Nevada have steep sales tax rates at or around 7%…while Alaska, Delaware, Montana, New Hampshire and Oregon have 0% rates.

Property taxes. These rates typically are set by local governments, but they can be much higher in some states than in others. Examples: Average effective rates are above 2% in Illinois, New Hampshire and Connecticut…but they’re around 0.5% or less in Hawaii, Alabama and Colorado.

Estate taxes. The current federal gift- and estate-tax exemption of $12.92 million is so high that very few families need to worry about it, but some states have much lower exemptions. Examples: In Massachusetts and Oregon, estates as small as $1 million can be subject to state estate taxes.


3. Housing prices are only one part of the housing cost picture. Browsing on a real estate website might tempt retirees to certain parts of the country—“look at how much home we could afford if we moved there!” But the cost of buying a home isn’t the only housing cost component. As noted above, property taxes can vary by thousands of dollars per year depending on local tax rates—in New Jersey, for example, annual property tax bills above $10,000 are common. Homeowners insurance premiums for a $250,000 structure are less than $500 per year in some states, such as Hawaii, but more than $3,000 in Oklahoma and Kansas. Utility bills cost less than $2,500 per year, on average, in Utah, but more than $4,000 per year in Hawaii, New Hampshire, Connecticut, California, Alaska and Virginia, according to a recent study by the home-improvement referral service Angi.


4. Access to health care should be a major consideration—even if you don’t have major health issues. Most people select their retirement destinations when they’re in their 60s and still relatively healthy, so the distance to highly rated hospitals and doctors might not be high on their list of ­priorities. But it should be—as their age climbs into the 70s and 80s, the odds of serious health issues increase. Most large cities and their suburbs have high-quality doctors and hospitals, but health care is a greater challenge for people who retire to more rural areas. One option to consider: Look for an area near a university medical center, many of which are highly rated.


5. Access to a big airport can be a big plus. As much as you might love the retirement destination you select, you still may want to get away from it occasionally, whether to visit friends and distant loved ones or to explore different parts of the world. There are airports almost everywhere, but it’s best to be within a few hours of a major airport—airfares and travel times will be significantly reduced if you don’t have to begin and end every journey with a short flight between a small regional airport and a major airport.

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