Picking where to retire doesn't have to be a shot in the dark
When it comes to choosing a good location to retire, look beyond the magazine lists.
“A common error some retirees make is assuming a magazine article listing ‘Best Places to Retire' applies to them,” said Tom Murphy, a certified financial planner at Murphy & Sylvest LLC in Dallas.
“The criteria the magazines use may or may not be relevant to any particular retiree's plans,” he said. “In addition, these magazines tend to evaluate locations based on a very small number of criteria.”
For example, a magazine might judge a town in Florida as a great place to retire because of the weather — but you may not like a hot and humid climate.
Similarly, Murphy noted, “sometimes they judge the lowest state income tax as best without considering property tax.”
Take the case of Texas, which doesn't have a state income tax or an inheritance or estate tax but has one of the highest property tax rates in the nation. What's more, the state sales tax rate is 6.25 percent, but local rates can add another 2 percentage points.
Here are questions that can help you make an informed decision:
• Can you afford it?
Take note of the average price of a home, the area's cost of living and the tax burden on retirees. Calculate your monthly expenses and make sure they won't be a drain on your savings.
“What may appear like a lot of well-earned fun can become a serious burden,” said James Blythe, a certified senior adviser and loan officer at 1st Reverse Mortgage USA in Dallas. “I ask (clients) if they are having to use the principal of their assets to afford to live and not the income from those assets.”
Also, calculate what would happen to your finances if your spouse died suddenly. Will you have enough money to sustain yourself?
“I met a man in a wonderful retirement community with a beautiful golf course home,” Blythe said. “His wife had just passed away, and he lost her retirement pension income as well as her Social Security. That 3,000-square-foot home was causing him to go through his retirement assets like a hot knife through butter.”
The man knew it was a bad deal for him and that he couldn't afford the home, Blythe said.
“But this was his dream home he had worked for all his life,” he said.
Beware of hidden housing costs also, such as taxes, insurance, utilities and maintenance.
• Are services nearby?
Before you buy, determine whether the neighborhood has needed services — doctors, pharmacies, banks, grocery stores, etc.
Does the community have a sufficient number of doctors and health care facilities?
“That's really important — things like, can you get to pharmacies easily?” said Amy Levner, manager of home and family issues at AARP.
Added Blythe: “Too many times I have helped retirees relocate because that lake home was way too far from medical and other services.”
• Too far from family?
Will you have to travel far to see family and friends?
“For many retirees, happiness is in direct proportion to the size and strength of their social network,” Murphy said.
Blythe poses this question: “Is your retirement home going to provide you with the involvement with your family and community?”
“All too often I hear that they (retirees) are spending a lot of money on traveling just so they can see their grandchildren,” Blythe said. “That can cause a lot of friction as well in a marriage. Grandma wants to see the kids, and Dad is tired of traveling.”