Retiring In Another State? Don't Forget to Plan for These 3 Things

Relocating in retirement can bring you closer to family, hobbies, and better weather. But it's not always kind to your wallet. To maintain your financial security after leaving the workforce, you need to understand how your move will affect your budget and your tax bill. Here are three of the most important financial factors to keep in mind if you plan to move to another state in retirement.

1. Cost of living

You'll have to save more for retirement if you plan to move to an area with a higher cost of living. Conversely, you might be able to retire on a smaller nest egg if you choose a more affordable state.

retiring in another state? don't forget to plan for these 3 things

Two people sitting outside in a backyard.

In case you were wondering, here are the 10 cheapest and 10 most expensive states for retirees:

Rank

Cheapest States for Retirees

Most Expensive States for Retirees

1

Mississippi

Hawaii

2

Oklahoma

Massachusetts

3

Kansas

California

4

Alabama

New York

5

West Virginia

Alaska

6

Georgia

Maryland

7

Missouri

Oregon

8

Iowa

Vermont

9

Arkansas

Washington

10

Tennessee

New Hampshire

Source: Missouri Economic Research and Information Center.

But a lot depends on where you live within these states. It's a good idea to compare how the cost of living in your current hometown stacks up to your desired retirement city when estimating how much you need to save for retirement. You may want to repeat this exercise more than once over the years, as costs in some places rise faster than others.

2. Tax rates

Where you retire determines which types of taxes you'll owe and how much you'll pay annually. Some states, like Florida, don't have state income taxes. This could save you quite a bit compared to living in a state that taxes its residents' income.

Social Security benefit taxes are another thing to watch out for. Currently, only 10 states have them, and they only apply to certain residents -- usually those with high incomes or large annual Social Security benefits. If you move to a state that has these taxes, check its rules to learn if you'd actually owe anything. If you do, budget for this when estimating your annual retirement expenses.

Other taxes to keep on your radar include:

  • Property taxes: This can have a huge effect on retired homeowners, though it shouldn't bother you if you plan to rent in retirement.
  • Estate or inheritance taxes: This may not concern you directly, but if you hope to pass as much of your wealth on to your heirs as possible, you might prefer a state that doesn't have these taxes.
  • Sales tax: You still need to buy things in retirement, and state sales tax rates have a big effect on how much your everyday goods will cost you.

If you have any questions about how state tax laws could affect your retirement plan, you may want to consult with a tax professional based in the state you hope to retire in.

3. Travel costs

Though less significant than the two factors mentioned above, travel costs are still important to think about when planning your retirement budget. If moving to another state takes you away from friends and family, you'll probably want to return for visits once in a while. This might involve taking a flight and renting a car and a place to stay for some. That could easily amount to thousands of dollars per trip.

You'll have your initial moving costs too. This is a one-time expense, but it could be pretty substantial, especially if you have to buy new furniture or appliances for your new home in retirement.

It can be difficult to estimate how much these things might cost you, since travel expenses can change significantly over just a few days. But you can use today's costs as a baseline and build in a cushion to be extra safe.

Taking the above steps now can give you an idea of what your retirement savings target should be. But update this as necessary as you get closer to retirement. Your plans for the future could change, and so can the average cost of living and state tax laws.

What stocks should you add to your retirement portfolio?

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now. The 10 stocks that made the cut could produce monster returns in the coming years, potentially setting you up for a more prosperous retirement.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $580,722!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

The Motley Fool has a disclosure policy.

OTHER NEWS

5 hrs ago

Rangers poised to win eighth NPFL title

5 hrs ago

Euro 2024: Morata becomes third top scorer in history of competition

5 hrs ago

Incredible lightning strike captured on dashcam over motorway

6 hrs ago

Electric Vehicle Adoption: Consumer Choice and Costs

6 hrs ago

Hot Or Not: Tesla Cybertruck Wraps You Can't Look Away From

6 hrs ago

UPDF hands over Bariire base to Somali army

6 hrs ago

‘Bad for tourism’: Why travel agents say the new EU Entry/Exit system could be delayed again

7 hrs ago

Sinovac hits back over reported US campaign to discredit China’s Covid-19 vaccine

7 hrs ago

Prabowo adviser denies plans to raise Indonesia's debt to 50% of GDP

7 hrs ago

‘The time of the whole car city is over’: How is Paris encouraging walking and cycling?

7 hrs ago

Chinese premier in Australia promises replacement pandas

7 hrs ago

UN peacekeepers deployed in DRC to counter new wave of violence

7 hrs ago

2026 World Cup And NFF’s Approach To Rescue S’Eagles

7 hrs ago

'What a game.' UK baseball reflects on winning College World Series opener

7 hrs ago

Your Full Guide to Disposable Vapes

7 hrs ago

Czech Delegation Seeks Investment From Taiwan's Chip Suppliers - TaiwanPlus News

7 hrs ago

Copa America 2024: I don’t agree with Ronaldinho’s statement – Raphinha

8 hrs ago

Malaysia pins its belt and road infrastructure hopes on deepening China ties

8 hrs ago

Australia’s tighter immigration policy poses risk to luxury home market

8 hrs ago

Meet Park Chan-am: leading South Korea’s defense against North Korean cyber attacks

8 hrs ago

Ethiopia Can Balance Electric Power Interconnection of Region: APRA Secretariat Head

8 hrs ago

Messi names best goalkeeper in the world

9 hrs ago

TSMC Eyes Europe With Shares at Record High - TaiwanPlus News

9 hrs ago

DeChambeau a one-man show at Pinehurst No. 2 and leads US Open by 3

10 hrs ago

‘Beyoncé stepped out of her comfort zone to collaborate with me’ – Sean Paul

10 hrs ago

Brazil: Thousands protest bill tightening abortion ban

11 hrs ago

If You'd Invested $10,000 in Chipotle Mexican Grill Stock 5 Years Ago, Here's How Much You'd Have Today

11 hrs ago

Six Trooping the Colour pictures that caught the eye

11 hrs ago

Italy begin Euro 2024 title defense with win as Spain start in style

11 hrs ago

Three swimmers in China doping scandal failed earlier tests: report

11 hrs ago

Le Mans 24h, H12: Porsche battles against Toyota at the halfway point

11 hrs ago

Switzerland thrash Hungary in Euro 2024

11 hrs ago

Cantlay has another steady round to stay within reach of 1st major title at US Open

11 hrs ago

Rise in badly-behaved tourists prompts Indonesia visa reassessment

11 hrs ago

Flag/ Fan Friday RWANDA! (Geography Now!)

11 hrs ago

Mistakes Everyone Makes When Ordering Food From Subway

11 hrs ago

Golden Brown Pizza Dough

11 hrs ago

5 Services the Middle Class Won’t Be Able To Afford in the Next 5 Years

11 hrs ago

PM Extends Eid al-Adha Best Wishes to Ethiopian Muslims

11 hrs ago

Germany: EURO 2024 opens with Germany's commanding win, Scottish fans celebrate spirit despite defeat