What to Consider Before Making Your Retirement Move

The best advice for retirement is simple: plan early. You may have enrolled in a 401k and saved money, but knowing how to retire is more than that. Whether you want to retire to the mountains or the beach, there are many factors to consider that will determine when and where you can afford to retire.

[Editor’s Note: Check out the webinar, Goal Based Investing – Planning for Key Events, to learn more about financial planning for the future.]

Retirement can last more than 30 years for many, so the decisions you make now will dictate how long your savings will last—and where they will last the longest. You should begin considering and planning for retirement at an early age (20s to early 30s). Once you are ready to make more immediate plans, give yourself at least 10 years prior to retirement to make those plans. On the other hand, many modern jobs can be done remotely through telecommuting, so even if you’re not be able to fully retire when you want to move, you could move to your destination, work there and retire later.

We outline the best states to retire to and what you can start doing now to get there.

[For more on retirement, read “Is Your Retirement in Jeopardy?” by Alicia Purdy.]

Planning for Retirement: A Checklist

As you or your partner approach your golden years, there are several steps to take to get your financial and living situation in order. Merrill Edge advises individuals and couples to follow a pre-retirement checklist:

• Modify your investment portfolio to match your projected risk tolerance during retirement.
• If you are in your 50s, consider catch-up contributions to your 401(k) or IRA account and consolidate accounts if possible.
• Think about downsizing and minimizing loans and credit card debts.
• Take stock of your savings and assets to calculate your retirement income (roughly 4% of your total savings and assets).
• Ask yourself realistically how much money you expect to spend each year in retirement (e.g. travel expenditures, housing, etc.)
• Research health care options, such as Medicare.
• Figure out which states have appropriate living costs to your goals.

If you do not know how much you still need to save, you can use a retirement calculator to take into account inflation, taxable retirement income and how much you’ve already saved.

[Editor’s Note: You can read more about financial planning for retirement in the article, “Six Ways Private Equity Can Play a Role in Retirement Plans” by John Drachman.]

Factors to Consider in a Retirement Location

Location, location, location. It’s a major research requirement if you want to learn how to retire well. Where you live during retirement will affect your happiness and quality of life. Here are a few questions to consider before making a decision:

• Where will your friends and family be?
• How good is the health care infrastructure?
• How close is it to a major city, if you want to be near one?
• What is the cost of living?
• What are taxes like?

When researching retirement-friendly states, you should look at the state from every angle. Kentucky is particularly attractive from a tax perspective, since social security and railroad retirement benefits are exempt from state income tax. However, studies also rank Kentucky as one of the worst states for retirees due to poor health care opportunities and senior populations living below the poverty line. While some aspects may seem appealing, others can become quick deal breakers.

[Editor’s Note: Read more about health care and long-term care financing during retirement in “Long-Term Care Insurance: What People of All Ages Need to Know,” by Gay Jervey.]

Best States for Retirement

AARP often lists Florida as its top state for retirees, especially veterans. It cites affordability, veteran health care facilities and tax-friendliness.

A 2019 study by WalletHub ranked all 50 states from best to worst states for retirement. The study used 46 metrics, including the following:

• Adjusted cost of living
• Tax-friendliness on pensions and social security income
• Annual cost and quality of health care
• Senior levels of activity, obesity and disability
• Share of senior population
• Access to public transportation and entertainment
• Crime rate
• Weather

After taking these metrics (and others) into account, the study concluded these are the top 5 states for retirees:

Ranking	State	Ranking Metrics
1	Florida	The state was ranked highest for affordability (7th overall in tax-friendliness), as well as the largest population over the age of 65. Social isolation is not a problem for seniors living here, and entertainment is abundant.
2	South Dakota	The state was ranked highly for health care options, as well as its opportunities for seniors in the workforce. Extreme weather, however, bumps it down to the second spot.
3	Colorado	Though it is much less affordable than Florida and South Dakota, Colorado provides ample options for senior health care, and there is plenty of access to activities and entertainment in a clean-air environment.
4	New Hampshire	Close to Colorado in affordability, New Hampshire actually stands out for its safety and low property crime rates. It also ranks third for overall quality of life, boasting lower taxes.
5	Virginia	While housing and affordability are somewhat average, the state’s historic attractions and mild weather help even out a ranking of 27th in health care.

[Editor’s Note: Thinking of retiring abroad? Read “Retiring Abroad: Does Your Wanderlust Make Financial Sense?” by Cristina Nolan.]

Among the worst states were the following:

Ranking	State	Ranking Metrics
1	Kentucky	Kentucky has the third lowest ranking for quality of life, which includes higher crime, senior poverty, and fewer things to do. It ranks similarly for health care, where top-rated hospitals are scarce, and senior health is poor. Finally, it is only ranked 32nd for affordability, despite social security being tax-exempt.
2	Rhode Island	Rhode Island is ranked as the fifth worst state for taxpayers, as well as for overall affordability. This includes cost of living, estate tax and pension/social security income tax.
3	West Virginia	West Virginia ranks as one of the lowest states for life expectancy, and its poor health care system is to blame. As for quality of life, the state also ranks among the lowest for senior employment. It is also one of the states with the fewest museums and theaters per capita.
4	Vermont	Vermont is considered the least affordable state in the nation, and part of that is due to it high cost of in-home services. It ranks higher than three other states, however, because it ranks 6th in quality of life.
5	New Jersey	The state is only the 45th most affordable in the country, and property taxes are high. However, it ranks higher (29th) in health care, compared to Kentucky and West Virginia.

Perhaps you haven’t yet weighed the merits of South Dakota or New Hampshire, but one thing is for certain: the best time to start planning your retirement is now.

[Editor’s Note: This article is an updated version of an article Financial Poise first published on August 13, 2015.]