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Retiring in Another State? Key Considerations from CNBC

Jeremy
Jeremy

Riverbend Featured in CNBC:

“Here are some things to think about before deciding to retire in another state.”

By Deborah Nason

Thinking about retiring to another state? You’re not alone. A United Van Lines study found the percentage of people retiring to a new state had increased to 18.3% in 2021, up from 13.4% in 2015.

Making the move is not a straightforward decision, however, as there are myriad financial and non-financial considerations involved. Financial advisors can help you cover all the bases.

“There are times [when] the financial implications are so significant that it would behoove someone to do the analysis all around before packing up,” said certified financial planner Marianela Collado, CEO of Tobias Financial Advisors in Plantation, Florida. And while many are seeking lower property taxes, “you don’t really want the ‘tax tail to wag the dog,’” she added.

Collado offers up several significant issues for consideration, including:

  • Cost of living: This may include health care, health insurance, rent, home prices, home insurance (especially in a place like Florida), property taxes, transportation costs, etc.
  • Income taxes: It can really impact long-term retirement projections when you move from a state without income taxes to one with state levies on earnings.
  • Estate taxes: Many states have much lower estate-tax exemptions than the federal government, which could result in a state estate tax applying to heirs.

The grass is not always greener on the other side, said Kevin Brady, CFP, vice president with Wealthspire in New York. He encourages clients to also think about the tax implications of changing domicile. If they have residences in different states, there can be very strict requirements to meet in terms of days spent in a new state before clients can claim residency for tax purposes.

Benjamin Brandt, CFP and founder of Capital City Wealth Management in Bismarck, North Dakota, said “you want any potential tax savings to be the icing on the cake.”

“There are very few free lunches with taxes,” added Brandt, who also hosts the Retirement Starts Today podcast. “They could be offset by other taxes.”

When it comes to health care, Brandt advises clients to be aware of possible restrictions in doctor choice, as physicians are not accepting Medicare in some areas popular with retirees.

“It’s important to check with your health insurer to make sure you retain benefits in your new location,” said Jeremy Finger, CFP, founder of Riverbend Wealth Management in Myrtle Beach, South Carolina.

“Both private health insurance for younger retirees and Medicare Advantage plans have specific service areas,” he said. “Retirees moving out of the service area will need to find a new plan, which could mean more expensive premiums and increased out-of-pocket costs.”

Legal documents should also be reviewed to account for different laws in the new state of residence, Finger said.

It’s important to manage expectations

Before making any out-of-state move, people need to think about what friend or family connections they have in the new state, Wealthspire’s Brady said.

“Being farther away from children or grandchildren can be emotionally difficult, not to mention more financially burdensome if frequent trips back and forth become the norm,” he said.

Clients should look into the possibility of renting for a year or more in the desired new state to see if reality matches expectations, Brady said. “This can get complicated if the primary residence in the ‘old’ state is kept, but is a much lower-cost alternative to buying a second home.”

It’s a big mistake to not rent before you move, noted Brandt at Capital City.

“We’re conditioned as savers to not rent and throw away money, but buying and selling quickly is almost a guaranteed recipe for losing money,” he said. “It’s totally different picking a neighborhood versus being on vacation.

“If you’re following your kids, there’s no guarantee they won’t move again — or feel they can’t move because they have to stay near you,” Brandt added.

For his part, Finger at Riverbend noted that people sometimes move to get away from, and not closer to, something.

“But what matters is how you spend your time and who you spend it with,” he said. “It’s important to have a sense of purpose.”

Read more at CNBC.com here.

Our practice adheres to the FIDUCIARY STANDARD. This means we are legally and ethically held to giving our clients advice that is in their best interest. Investment advice offered through Stratos Wealth Advisors, LLC, a Registered Investment Advisor. Stratos Wealth Advisors, LLC and Riverbend Wealth Management are separate entities. Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Riverbend Wealth Management, or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of Current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from RIVERBEND WEALTH MANAGEMENT. RIVERBEND WEALTH MANAGEMENT is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. RIVERBEND WEALTH MANAGEMENT is not affiliated with CNBC the publisher of this article. This is a system generated email. Please do not respond as this mailbox is not monitored.

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