There may come a point during retirement when you decide that you’re ready for a change of scenery or pace. Maybe you’re hoping to seek out a warmer climate. Maybe you want access to more entertainment than what your sleepy town currently gives you. Or maybe you want to move closer to a family because grandkids have recently come into the mix.
Either way, relocating is a big decision, whether you’re retired or not. But if you are retired and a move is on your radar for 2023, you’ll want to run through these key questions first.
1. How will my living costs change?
Moving to a new state could result in a whole new set of expenses. In some cases, relocating could leave you spending less than what you’re used to. But in other cases, you may end up spending more.
If you move someplace where housing costs and property taxes are higher, that alone might drive your total expenses up. But also, think about the impact something like climate might have on your spending.
For example, if you’ve been living in the northern half of the country and are used to hibernating during the winter, you might spend little on entertainment during those months. If you head south, you may be less inclined to spend the winter months cooped up at home. That could result in added retirement spending.
2. Will I spend more on income taxes?
There are eight states that do not charge personal income taxes:
- South Dakota
If you currently live in one of these states and move elsewhere, your IRS burden could rise substantially.
Now if you happen to get a lot of your income from a retirement savings plan that offers tax-free withdrawals, like a Roth IRA, then this may not be so much of an issue. But if the bulk of your income comes from taxable sources like a traditional IRA or 401(k) plan, it’s something to consider before making a move.
3. Will my Social Security benefits be subject to taxes?
Your Social Security benefits may be subject to federal taxes based on what your total retirement income looks like. But when it comes to state taxes, each state makes its own rules.
There are 12 states that impose taxes on Social Security income:
- New Mexico
- Rhode Island
- West Virginia
You might get out of paying taxes on your Social Security benefits if you’re a lower or moderate earner, but not all of these states offer such an exemption. You’ll need to keep that in mind before relocating, too.
All told, relocating could make your retirement more enjoyable and financially comfortable. But you’ll need to understand the implications of moving from one state to another before taking that leap. So if you’re plotting a move for 2023, do plenty of research first so you don’t wind up regretting your decision after you’ve packed up your home and uprooted your life.
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Source: nasdaq.com ~ By: Maurie Backman ~ Image: Canva Pro