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.

IRMAA: The Sneaky Surcharge That Makes Medicare More Expensive

IRMAA is a sneaky surcharge that can increase your Medicare premiums if your income exceeds a certain threshold in retirement. 

When it comes to estimating your future expenses in retirement, one of the biggest unknowns is the cost of healthcare.

According to a 2022 Fidelity report, the average 65-year-old retired couple may need about $315,000 to cover healthcare expenses. However, depending on your lifestyle, how long you live, and a multitude of other factors, your healthcare costs may far exceed this estimate.  

Indeed, healthcare tends to be one of the largest–if not the largest–living expense for most retirees. Thus, the last thing you want is for your healthcare costs to unexpectedly rise, especially when you can prevent it.

That’s why it’s important to understand what IRMAA is, as well as the steps you can take to avoid it. 

What Is IRMAA?

IRMAA, short for income-related monthly adjustment amount, is a surcharge Medicare beneficiaries must pay each month if their income exceeds a certain threshold. 

To determine if you’re subject to IRMAA charges, the Social Security Administration uses your modified adjusted gross income (MAGI) from your tax return two years ago. For example, the 2023 income brackets for IRMAA apply to the adjusted gross income you reported in 2021. 

In 2023, the standard Part B monthly premium is $164.90. Those subject to IRMAA may see their Part B premiums increase by as much as $395.60 per month. Furthermore, IRMAA can increase Medicare Part D premiums by as much as $76.40. 

Therefore, IRMAA can significantly increase your healthcare expenses if you make too much money. While there are ways to appeal IRMAA if you don’t think it applies to you, the easiest way to avoid it is to keep your retirement income below the threshold. 

How Is IRMAA Calculated?

The Social Security Administration uses its own MAGI calculation to determine if you must pay IRMAA. To calculate this number yourself, locate your Adjusted Gross Income (AGI) on your tax return. Then, add the following:

  • Tax-exempt interest that you’ve earned or accrued (e.g., municipal bond interest).
  • Interest from U.S. Savings Bonds you used to pay for higher education.
  • Any income you earned while living abroad that was excluded from your gross income.
  • Income from Puerto Rico, American Samoa, Guam, and/or Northern Mariana Islands, which is not otherwise included in AGI. 

The total amount is your Medicare-specific MAGI. Below are the income brackets for 2023. These income thresholds generally change each year based on the inflation rate. 

Who Pays the Medicare Surcharge?

If you owe IRMAA, the Social Security Administration will let you know by sending you a letter. Here’s how it works:

  • When you first enroll in Medicare, you pay the standard Part B and D premiums.
  • If your income is high enough to trigger IRMAA, the Social Security Administration will send you a pre-determination notice.
  • If you believe the information that the SSA sends you is inaccurate, you have 10 days to contact them to dispute the notice.
  • Otherwise, the SSA will send you an initial determination notice within a few weeks of sending the pre-determination notice.

The determination notice has most of the same information as the pre-determination notice but also outlines an appeals process. If you decide to appeal the IRMAA decision, you must file Form SSA-44 and show that either your tax return was out of date or inaccurate or that your income has recently decreased because of a life-changing event. Examples may include:

  • Death of a spouse
  • Divorce or annulment
  • Marriage
  • Work stoppage or reduction 

If you are subject to IRMAA and have your Medicare Part B and D premiums deducted from your Social Security checks, you don’t need to take any action to pay the surcharge. If you pay your premiums separately, you’ll receive a bill to pay IRMAA.

Will I Avoid IRMAA Surcharges?

Strategies that Can Help You Avoid IRMAA

Keeping your income below the IRMAA threshold is the easiest way to avoid the Medicare surcharge. 

This may be challenging if you need to make a large withdrawal for an unexpected expense or in years when you must take required minimum distributions (RMDs). Fortunately, there are a variety of tax planning strategies that can help lower your Medicare-specific MAGI. 

Below are a few examples of strategies that can help you avoid IRMAA. 

Give Strategically

  • Donate cash to a donor-advised fund (DAF). A DAF allows you to make a lump-sum charitable donation and take the deduction in the current tax year. An additional benefit is that you don’t have to decide where your donation goes right away. Instead, you can take your time and direct your donations in the years that follow.
  • Donate appreciated securities directly to a charity or to a DAF. This strategy allows you to avoid the capital gains taxes you’d otherwise pay if you sold the securities outright. Since capital gains are included in the MAGI calculation, this strategy can help reduce your Medicare-specific income.
  • Make a Qualified Charitable Distribution (QCD). If you reach RMD age and don’t need the extra income, you can donate your RMD to charity—a tax planning strategy called a qualified charitable distribution (QCD). A QCD allows IRA owners to transfer up to $100,000 directly to charity each year. And since RMDs are included in the MAGI calculation, donating yours can help you avoid triggering the IRMAA surcharge.  

Use Down Markets to Your Advantage

  • Tax-loss harvesting. The IRS allows investors to offset realized capital gains with realized losses from other investments. If you have substantial losses, you may be able to completely offset your gains and potentially lower your taxable income. 
  • Roth conversion. Since account values typically decline in a negative market environment, so does the amount on which you’ll pay taxes when converting part or all of your traditional IRA funds to a Roth. Plus, since Roth IRAs don’t have RMDs, you can reduce your taxable income in future years. 

Max Out Tax-Advantaged Accounts If You’re Still Working

  • Traditional IRA or 401(k). Contributions you make to traditional retirement accounts reduce your taxable income. You can also take advantage of catch-up contributions once you turn 50. 
  • Health savings account (HSA). With an HSA, contributions, capital gains, and withdrawals are all tax-free if you use your funds for eligible healthcare expenses. And like qualified retirement accounts, you can deduct your contributions from your taxable income in most cases. 

Satori Wealth Management Can Help

Planning for retirement can feel overwhelming, especially with so many variables and unknowns. The good news is you can minimize unnecessary expenses like IRMAA and make the most of your resources in retirement with a well-defined financial plan. 

An experienced financial planner like Satori Wealth Management can help you transition to the next phase of life with confidence. To get started, book your free RetireNow™ Checkup today.