Yearning for warmer winters? Think about what it’d mean to leave your nest – temporarily – and establish a new one.
A different breed than the common American Retiree, the Snowbird heads south for months at a time, chasing an endless summer in places like California and Florida. If you’re hoping to join their flocks, there are certain preparations you’ll want to make, putting a lot of thought into what it really means to leave your nest – temporarily – and establish a new one.
My wife, Mallory, and I decided to move from Michigan to Florida more than a year ago. We manage to spend a considerable portion of the year in Michigan visiting family as well. So, I completely understand why you might consider moving to a warmer, sunnier area. Many of my clients live this lifestyle, and have learned that it takes a lot of preparation.
One study showed that by age 61, most people feel free enough to live wherever they want. To narrow down your choices, start with the weather. Retirees often prefer climates in the Mountain, South Atlantic and Pacific regions of the country. Consider taking extended vacations to cities in regions that entice you to get a true feel for each place.
In this instance, feeling free may mean « financially free ». Throughout your life — and when you retire — you live off of several income sources including your 401(k)s, 401(b)s, IRAs, pension(s), social security, different investment types etc. As a general rule, you should distribute no more than 4% of these investments per year to sustain your current lifestyle. By doing so, you are supposedly preserving your capital for many years.
A place to perch
Once you find a location, it’s time to find a home. One option is to rent for one or two years. This allows you to explore an area and closely examine for-sale opportunities, while avoiding many of the maintenance responsibilities that come with buying a home. If you prefer to buy, try to do so a few years before you stop working. Getting a mortgage is much easier when you still have employment income.
People often consider purchasing multiple investment properties in different locations in order to add some extra rental income as well as have the option to visit different places each year. While this may seem to be a win-win on the surface, be sure to also consider the time and effort each property requires. From maintenance, to managing rentals, to advertising the space when it’s vacant — the work involved may not be ideal for someone seeking to enjoy a laid-back retirement.
Feathering your nest
Warm-weather clothing, accessories and home décor won’t be your only moving costs. There are maintenance and homeowners or condo fees, travel costs, property taxes, insurance, out-of-network healthcare and more. Fortunately, you may be able to cut or lower your cable, internet, phone and subscription services at your primary residence while you’re away. If you need to, think about seasonal employment opportunities, too. Just be sure to maintain the appropriate requirements to work in your chosen state.
Birds of a feather
Establishing a new life elsewhere doesn’t mean losing sight of your old one. But it’s still crucial to make new connections wherever you may roam. When appropriate, take advantage of community events like cookouts, socials, dances and book clubs. Check out rec centers, libraries, places of worship and community associations. You’ll feel like a local soon enough.
Before you flock to your next location:
- Visit taxfoundation.org to learn about the tax rules in your prospective new state.
- Reach out to a knowledgeable accountant and estate attorney to discuss your plans of buying or renting a property.
- Speak with your advisor and accountant about the tradeoffs that can accompany a long-term dual lifestyle.
Remember that if you live more than 183 days (approx. 6 months) in a specific state, you become a fiscal resident of this state and may have to pay the state and local taxes.
If you are or would like to become an American Snowbird, feel free to reach out to me. We can discuss anything related to your retirement, investment, taxes and estate planning needs & objectives.