Relocating in Retirement

Relocating in retirement can be a fantastic way to live out your dreams, experience a change of scenery, or simply enjoy a lower cost of living in your golden years. In fact, more than 234,000 Americans retired to a new location in 2022—a 4% increase from the previous year.

Although retirees are moving at an increasing rate, choosing the right place to retire can be a complicated decision that requires careful due diligence and planning. In this article, we’ll explore a variety of factors to consider when deciding whether to relocate in retirement, so your new home remains aligned with your financial and lifestyle goals.

5 Factors to Consider When Deciding If Relocating in Retirement Is Right for You:

#1: Your Priorities

When it comes to choosing your ideal retirement destination, you should first identify what’s most important to you. For example, you may want to lower your cost of living so your retirement savings last longer. Or perhaps you wish to live closer to family or move to a warmer climate.

No matter your motivations for moving, there will inevitably be tradeoffs to consider as you weigh your options. Being clear about your priorities can help you evaluate these tradeoffs and make a sound decision for your future.

#2: Cost of Living

In many cases, relocating in retirement can be an effective way to lower your cost of living and extend your financial resources. In 2019, for example, the average person aged 60 or older who sold their home and relocated to a cheaper housing market unlocked nearly $100,000 in home equity, according to a recent study.

Indeed, the cost of housing, groceries, healthcare, and taxes can vary significantly from one location to another. To ensure your potential new home fits comfortably within your retirement budget, it’s important to understand how differences in the cost of living may affect your income needs.

If you’re looking for a low-cost retirement destination, U.S. News & World Report updates its list of The Most Affordable Places to Retire each year. Alternatively, if you have a location in mind, you can use a cost-of-living calculator to see how much income you’ll need to maintain your current lifestyle in your new home.

#3: Retiree Taxes

One of the top reasons retirees relocate is to move to a more favorable tax environment. Since taxes can have a substantial impact on your retirement savings, establishing a residence elsewhere can help you preserve your nest egg longer.

Some states have no state income tax, making them attractive options for retirees. Currently, tax-free states include Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

In addition, New Hampshire and Tennessee have no state income taxes for earned income but do tax dividend and interest income. Other states offer specific tax benefits for retirees, such as exemptions on retirement income or Social Security benefits.

Also, keep in mind you don’t necessarily need to live somewhere year-round to benefit from local tax laws. In most cases, the IRS requires you to live somewhere for at least 183 days of the year to establish an official tax residence.

#4: Access to Quality Healthcare

When it comes to relocating in retirement, another important consideration is your access to quality healthcare.

According to the National Council on Aging, nearly 95% of older Americans have at least one chronic condition, and nearly 80% have two or more. Since healthcare needs tend to become more complex as we age, it’s crucial to have high-quality medical facilities nearby.

As you evaluate your relocation options, consider the availability and proximity of hospitals, specialty clinics, and healthcare providers. In addition, if you’re considering moving before age 65 and plan to purchase insurance from the ACA Marketplace, make sure your new state offers reasonable insurance options for your healthcare needs.

#5: Quality of Life

Quality of life is a broad term that can include everything from the local climate and culture to your overall sense of safety and security. Your quality of life in retirement will also depend in part on how closely your new environment aligns with your lifestyle goals, hobbies, and interests.

For example, if you enjoy outdoor activities, you may want to move somewhere that has easy access to hiking and biking trails, parks, and other recreational facilities. Or if you plan to travel frequently in retirement, you may want your new home to have easy access to a major airport.

For many retirees, your quality of life will also depend on less tangible factors, like your mental health and overall happiness level. Thus, it’s important to consider the local community and the social opportunities it provides, as loneliness and isolation can be particularly challenging for those in retirement.

Being close to children and grandchildren is also a high priority for many retirees. It’s important to consider how often you plan to visit them and how you will get there. Will you be okay taking numerous short flights or long drives throughout the year? Maybe it’s more important for your overall happiness to be located in the same city.

Ultimately, relocating in retirement isn’t just a financial decision but one that considers all aspects of your well-being. If relocating is part of your plan, make sure the destination you choose supports your various needs and values. 

Additional Factors to Consider When Relocating in Retirement

In addition to the considerations above, other factors to consider when relocating in retirement may include:

  • The local real estate market. If you’re planning to buy a home in your next location, it’s essential to understand the local real estate market. Housing prices, property taxes, and insurance costs can significantly impact your retirement budget. Therefore, it can be beneficial to work with a local realtor who understands the market and can guide you toward areas that suit your budget and lifestyle preferences.
  • Climate and weather. The weather plays a significant role in our daily lives, and this holds true in retirement as well. While some people might dream of a beachfront condo where they can soak up the sun, others may prefer a mountain cabin with cool summers and snowy winters. Be sure to consider your climate preferences when choosing your retirement destination.
  • Retiring abroad. Whether you’re drawn to the affordable cost of living in some countries or the allure of a new culture, retiring abroad comes with a unique set of opportunities, challenges, and considerations. Be sure to spend ample time in the country you’re considering, educate yourself on its healthcare and tax systems, and consider the emotional impact of living far from home before relocating to a new country.
  • Proximity to loved ones. Lastly, you may want to consider the proximity of family and friends when choosing your retirement destination. Living closer to your loved ones can provide emotional support and practical assistance as you age, while moving to a far-off place might make visits less frequent. Ultimately, this is a personal decision that depends on your family dynamics and preferences.

Satori Wealth Management Can Help You Determine if Relocating in Retirement Is Right for You

Relocating in retirement is a significant consideration that can greatly affect your quality of life and financial well-being in your golden years. While it offers new and exciting opportunities, it can also present a unique set of challenges. Thus, it’s important to do your homework and consider the various tradeoffs involved with moving before committing to a new location.

If you’re considering relocating in retirement, Satori Wealth Management can help you develop a comprehensive retirement plan that considers your financial needs and lifestyle goals. To begin your retirement planning journey, schedule your Free RetireNow™ Checkup today.

Maximize Your Social Security Benefits

Social Security is an important source of income for many retirees. Unfortunately, it’s all too easy to make mistakes that significantly reduce your benefits. In fact, only 15% of Americans preparing for retirement strongly agree that they know how to maximize their Social Security benefits, according to a 2022 report from the Nationwide Retirement Institute.

The good news is many of these mistakes are avoidable once you’re aware of them. In this blog article, we’ll explore eight common mistakes people make when claiming Social Security benefits and how to avoid them, so you can maximize your income in retirement.

To maximize your Social Security benefits, avoid these eight potentially costly mistakes:

Mistake #1: Claiming Your Benefits at the Wrong Time

The age at which you claim Social Security benefits can significantly affect the amount of retirement income that you receive. By understanding the impact of claiming Social Security benefits at different ages, you can make an informed decision about when to claim benefits based on your financial needs and goals.

Your full retirement age (FRA) is the age at which you’re entitled to receive your full Social Security benefit amount based on your earnings history. For those born in 1960 or later, your FRA is 67.

To maximize your Social Security benefits, it’s best to claim them after you reach your FRA—if you can.

If you claim them sooner, your benefits will be permanently reduced by up to 30% depending on your age. On the other hand, if you delay claiming Social Security benefits beyond your FRA, your benefit amount will increase by 8% per year, up to age 70.

Before claiming your Social Security benefits, be sure to consider factors such as your other sources of retirement income and projected expenses. You can also use the Social Security Administration’s Retirement Estimator to help you determine the optimal time to start taking benefits.

Maximize Your Social Security Benefits

Mistake #2: Not Maximizing Your Spousal Social Security Benefits

Spousal benefits can be especially beneficial for couples with a significant difference in earnings history. That’s because the lower-earning spouse can receive a higher benefit amount based on the higher-earning spouse’s earnings history.

Your spousal benefits amount is generally equal to 50% of your spouse’s FRA benefit amount. For example, if your spouse’s FRA benefit amount is $2,000 per month, you could be eligible to receive up to $1,000 per month in spousal benefits.

To maximize your Social Security benefits, first be sure to understand the eligibility requirements for spousal benefits.

Specifically, you must be at least 62 years old and have been married at least one year to be eligible. If you’re divorced, you must have been married for at least ten years and not have remarried before age 60.

In addition, be careful not to claim your spousal benefits too early. If you claim them before your FRA, your benefit amount will be permanently reduced.

Also, keep in mind if you’re eligible for your own Social Security benefits based on your own earnings history, you’ll receive the higher of your own benefit amount or the spousal benefit amount.

Maximize Your Social Security Spousal Benefits

Mistake #3: Ignoring the Impact of Taxes on Your Social Security Benefits

Depending on your income level, up to 85% of your Social Security benefits may be subject to federal income taxes. To maximize your Social Security benefits, make sure you’re aware of these income thresholds.

The IRS uses your “combined income” to determine how your benefits are taxed. You can calculate your combined income by starting with your adjusted gross income (AGI) and adding back nontaxable interest, as well as half your Social Security benefits amount in a given tax year.

In 2023, single taxpayers with combined income between $25,000 and $34,000 may have to pay federal income taxes on up to 50% of your benefits. If your combined income exceeds $34,000, up to 85% of your benefits amount may be taxable.

These same percentages apply to joint taxpayers with combined income above $32,000 and $44,000, respectively.

Mistake #4: Ignoring the Earnings Test

If you start taking Social Security benefits before your FRA and continue to work, your benefits may be reduced if you earn more than a certain amount. In 2023, for example, your benefits will be reduced by $1 for every $2 you earn over $21,240—if you start taking benefits before your FRA.

To maximize your Social Security benefits while you’re still working, try to avoid claiming your benefits until you reach your FRA. Once you reach your FRA plus one month, your earnings no longer reduce your benefits, even if you earn more than the annual limit.

Alternatively, you may want to cut back your work hours to stay below the earnings limit. A financial planner can help you determine the best strategy to maximize your Social Security benefits.

Mistake #5: Not Considering How Divorce Affects Your Social Security Benefits

If you’re divorced, you may be entitled to claim Social Security benefits based on your ex-spouse’s earnings history. In general, those who meet the following criteria can receive a divorced spouse benefit equal to 50% of your ex-spouse’s FRA benefit amount:

  • Your ex-spouse is entitled to Social Security retirement benefits.
  • You were married for at least 10 years.
  • You’re at least 62 years old.
  • You’re currently unmarried (unless your ex-spouse has remarried).

It’s also important to note that your ex-spouse doesn’t need to have claimed their own Social Security benefits for you to claim your divorced spouse benefit.

To maximize your Social Security benefits after divorce, try to avoid claiming your divorced spouse benefit before reaching your FRA. Otherwise, the amount you receive will be permanently reduced.

In addition, if you’re eligible for your own Social Security benefits based on your own earnings history, you will receive the higher of your own benefit amount or the divorced spouse benefit amount.

Maximize Your Social Security Divorced Benefits

Mistake #6: Failing to Consider Survivor Benefits

If you lose your spouse prematurely, you may be eligible for Social Security survivor benefits. As the surviving spouse, you can receive a survivor benefit equal to 100% of your spouse’s benefit amount if you’re at FRA or older.

To maximize your Social Security survivor benefits, first be sure to understand the eligibility requirements. If you’re the surviving spouse, you must meet the following criteria:

  • Your deceased spouse must have worked long enough and paid enough Social Security taxes to be insured for benefits.
  • You must be at least 60 years old (or 50 if you have a qualifying disability).

Keep in mind your survivor benefits may be reduced if you claim them before you reach your FRA or are entitled to your own Social Security benefits based on your own earnings history. In addition, survivor benefits may be subject to federal income taxes if your income exceeds certain thresholds.

Maximize Your Social Security Survivor Benefits

Mistake #7: Not Checking Your Earnings Record

If your earnings record is incorrect or incomplete, it can result in a lower benefit amount, potentially costing you thousands of dollars in lost retirement income.

The easiest way to avoid this mistake is to check your earnings record annually to ensure it’s accurate and complete. You can create an account with the Social Security Administration (SSA) to keep an eye on your statement.

If you do find errors on your earnings record, be sure to contact the SSA as soon as possible to correct them. Fixing any inaccuracies before you’re ready to retire can help you maximize your Social Security benefits when it comes time to claim them.

Mistake #8: Not Seeking Guidance from Satori Wealth Management to Maximize Your Social Security Benefits

The decisions you make about when and how to claim your Social Security benefits can have long-term implications for your retirement income and financial security. Fortunately, a comprehensive retirement plan can help you avoid potentially costly mistakes, so you can maximize your Social Security benefits.

Satori Wealth Management can help you navigate the complexities of Social Security, as well as the trade-offs and considerations involved in claiming your benefits. We can also help you explore strategies for maximizing your retirement income while minimizing the impact of taxes.

If you’re ready to begin your retirement planning journey, schedule your Free RetireNow™ Checkup today.

The Future of Social Security

As politicians debate the future of Social Security, comprehensive financial planning will become increasingly important for those seeking a secure retirement.

Social Security has long been a dependable source of retirement income for millions of Americans. Yet shifting demographics, economic challenges, and the aftershocks of the COVID-19 pandemic have raised concerns about the sustainability of the program.

In fact, the latest projections show that Social Security Trust Fund reserves are likely to run out by 2033—one year sooner than previously estimated. Unless Congress takes steps to shore up the program, beneficiaries will likely see a reduction in benefits.  

In this blog post, we’ll explore the factors contributing to a potential Social Security shortfall, as well as the financial planning strategies you can leverage to help secure your retirement.

How Social Security Works

In the United States, Social Security is a federal government program that provides retirement, disability, and survivor benefits to eligible individuals.

Employers and employees pay into the system through payroll taxes. Currently, employees contribute 6.2% of their income, and employers pay an additional 6.2% for each employee.

Meanwhile, self-employed individuals pay the entire 12.4% payroll tax. In 2023, payroll taxes apply to up to $160,200 of a taxpayer’s annual income.

Contributions go into a Social Security Trust Fund, which is used to pay benefits to current recipients. Consequently, when it comes to the future of Social Security, there’s no guarantee that the money you contribute will be available when you retire.

The Future of Social Security

Why the Future of Social Security Is in Jeopardy

Although the Social Security Trust Fund had an annual surplus of $10.9 billion in 2020, it ran a deficit of $56.3 billion and $22.1 billion in 2021 and 2022, respectively. The future of Social Security is now uncertain, largely due to a combination of demographic changes and economic factors.

First, the birthrate has fallen in recent decades amid a wave of retirements among Baby Boomers, the largest generation of workers in American history. That means there are more beneficiaries but fewer workers paying into the system to fund Social Security benefits.

To put this in perspective, there were 5.1 workers per Social Security beneficiary in 1960. Today, that ratio has fallen to 2.8 workers per beneficiary, and estimates suggest it will decline to 2.1 workers per beneficiary by 2040.

Meanwhile, the average life expectancy for Americans has increased over time.

When Social Security began in 1935, workers who started collecting benefits at age 65 were only expected to live another 12.5 years. By 2030, these projections rise to 21.6 years for women and 19.2 years for men.

Thus, not only are there more beneficiaries than workers today, but beneficiaries are collecting benefits for a longer period, on average.

More recently, the Covid-19 pandemic helped put the future of Social Security in jeopardy by prompting millions of workers to quit their jobs or forcing them into early retirement, resulting in a sharp decline in payroll taxes. An economic slowdown, persistent inflation, and weaker productivity growth have only exacerbated the issue.

How the Future of Social Security Affects Retirees

Unless Congress takes steps to shore up the program, beneficiaries will soon see their benefits decrease.

Current projections indicate that the Old-Age and Survivors Insurance (OASI) fund will be able to cover scheduled benefits in full until 2033. At that point, the program will only be able to fund 77% of scheduled benefits.  

Social Security beneficiaries may also see reduced cost-of-living adjustments (COLAs), which help maintain the purchasing power of Social Security benefits against inflation. For example, the cost of Social Security increased by 8.7% this year to account for rising inflation, according to the Wall Street Journal.

Lastly, various members of Congress have proposed raising Social Security’s full retirement age, changing the way benefits are calculated, and raising taxes to help cover the shortfall. No matter what Congress decides, the future of Social Security is likely to look markedly different than it does today.

Preparing for a Potential Social Security Shortfall

Ultimately, the future of Social Security depends on Congress’s ability to agree on a course of action. Given the potential political implications, it seems unlikely that either party would let the fund dry up altogether.

Still, waiting on Congress to shore up Social Security may not be wise, especially if you’re nearing retirement age. Instead, you may want to consider the following financial planning strategies, which can help you offset the risk of a potential reduction in benefits.

First, be sure to diversify your sources of retirement income. If you can, aim to max out your contributions to your employer-sponsored retirement plan and/or individual retirement account (IRA).

In 2023, individuals can contribute up to $22,500 to a 401(k), 403(b), and most 457 plans ($30,000 if you’re age 50 or older). You can also contribute up to $6,500 to a Roth or Traditional IRA ($7,500 for those 50 and older).

Even if you can’t contribute up to these limits, boosting your retirement savings can help you retire comfortably no matter the future of Social Security. Indeed, adding to your qualified retirement accounts each month can yield meaningful results over time—especially if you invest wisely.

Qualified retirement accounts offer certain tax advantages that allow you to grow your funds tax-free until you withdraw them in retirement. This benefit amplifies the power of compounding, which can boost your savings long-term.

If you don’t plan to retire in the near term, make sure you’re investing in stocks and other growth-oriented investments, so your retirement funds outpace inflation. On the other hand, if retirement is quickly approaching, make sure your asset allocation reflects your time horizon and risk tolerance.

Lastly, if you’re already retired, consider investing in bonds and/or dividend-paying stocks to offset a potential reduction in Social Security benefits. While these types of investments aren’t risk-free, they can still be meaningful and potentially tax-efficient sources of income in retirement.

Social Security Alternatives: Roth vs. Traditional IRA

Satori Wealth Management Can Help You Retire Confidently and Securely

While the future of Social Security is uncertain—and may be for some time—you can still achieve a financially secure retirement with proper financial planning. An experienced financial advisor like Satori Wealth Management can help you identify and implement strategies to preserve and grow your money over time, so you don’t outlive your financial resources in retirement.

To see if we may be the right fit for your financial planning needs, schedule your free RetireNow™ Checkup today. We look forward to hearing from you!