After putting down roots during their working years, it’s no surprise that most people choose to stay put when they retire. According to a study by Boston College’s Center for Retirement Research, only about 10 percent of older adults move in any given two-year period. The shaky economy and declining home prices are likely pushing that number even lower. But if you’ve always dreamed of relocating, now could be the perfect time.
With home prices falling for the better part of four years, it is definitely a buyer’s market. And while buying into a declining market can be unsettling, buyers are being rewarded with increased leverage when it comes to negotiating things like purchase price, repairs and closing costs. Add to that the fact that mortgage rates remain near generational lows and making a move could be much less of a financial burden than it was just a few short years ago.
Of course, you’ll likely need to sell your current house, but depending on where you live, selling could be easier than you think. The housing downturn has not affected all areas equally. Prices have fallen much more sharply in places like Florida, Arizona, and California — all traditional retirement locales. If you’re selling your house in the Midwest and moving to Florida, for example, you might actually come out ahead. This is especially true if you take the opportunity to downsize to a smaller place.
Don Jasper of Omaha, Nebraska recently purchased a home for retirement in Cape Coral, Florida. For years, he and his wife have talked about spending at least part of the year in a warmer climate. Recently retired, they took a vacation to Florida and spent part of the trip meeting with a realtor. “We were surprised at how reasonable home prices had become,” said Mr. Jasper. “The home we bought would have been out of our price range a few years ago.”
Getting a good deal isn’t the only factor that should influence your decision on whether to move. Tax rates vary greatly from state-to-state, so you should consider how things like state sales taxes, personal income taxes, retirement income taxes, and property taxes will impact your retirement budget. Inheritance and estate taxes might also affect your decision. In addition to taxes, you should consider things like climate, cost of living, healthcare facilities, proximity to family, and leisure and cultural activities. Talk with your spouse about what’s important to each of you and use your vacation time to visit the places you are considering.
Making the Transition
Once you’ve made the decision to move and have settled on the best community for you, it’s time to begin the transition. Find a real estate agent you trust and begin looking at available properties. If possible, buy your new home a year or so before you retire. This will not only give you a place to stay when you visit, but it will allow you time to begin setting up the new house. Each time you visit, bring things from your old house with you. This will help the new place feel like home and will help to de-clutter your old house, allowing it to show better when (or if) you decide to sell.
Some who choose to relocate initially regret their decision because they miss family and friends and because their new surroundings feel unfamiliar. To make the transition more natural, go out of your way to meet new people and get involved in the community. Finding a church to attend or joining a country club are great places to start. Also scout out things like where you will buy your groceries, get your car fixed, go to the dentist, and get your hair cut. Knowing your way around like a local will make you feel like you’re a part of the community as opposed to just an outsider on an extended vacation.
Finally, if you’re moving to a different state, meet with your attorney to make sure that your will, trust, and powers of attorney will be valid in your new state of residence. Make any necessary revisions.
Deciding where to live when you retire is one of the most important decisions you will make. It will impact your finances, friendships, leisure activities and even how frequently you see your family. Moving isn’t for everyone, but when done properly it can be the beginning of a rewarding new adventure. “We’re really excited,” says Mr. Jasper, “but we definitely did our homework.”
FPA member Joseph R. Hearn is a vice president at Teckmeyer Financial Services, LLC.