22 Costs and Challenges of Relocating for Retirement

When it comes to retirement, minimizing living expenses is a key part of making a nest egg last for as long as possible. Quite often, that effort involves relocating to a cheaper part of the country (or the world), where everything from taxes to housing costs and even food may be less expensive. But moving somewhere new for retirement comes with expenses and logistical considerations of its own. Here are some of the factors to keep in mind if a move will be part of your golden years, gathered from personal finance, real estate, and retirement experts from across the country.

If you currently own your home and will be selling it in order to move, don’t forget to factor in all the costs associated with that process. These include a real estate agent’s commission, closing costs or other credits to the buyer, transfer taxes, home warranties for the buyer, and capital gains taxes. There are also costs associated with preparing your home to be sold such as painting, replacing windows, staging your home, and landscaping.

Sure, you may be able to afford a beachfront home in Mexico for far less than what one might cost in the United States, but be sure to consider all of the expenses associated with such a decision, says Will Smayda, Consumer Banking & Merrill Edge Central Division Executive, Bank of America. “For example, relocation costs, whether moving your belongings or furnishing a home from scratch, may be higher than if you moved somewhere domestically,” Smayda says.

It may take some time to find a permanent home or apartment in your new community, during which time your belongings (if you decide to bring them along) may have to be stored somewhere, says Ash Exantus, head of financial education and a financial empowerment coach at BankMobile. Be prepared for this expense by researching storage fees in your future community and looking for deals or special offers.

In addition to storing belongings temporarily, you should also be prepared to pay for temporary housing in the event you can’t immediately transition into a permanent place, says Exantus of BankMobile. Again, some advance legwork can help identify what those temporary housing costs may be.

Just like selling your current home, the purchase of a new property comes with a variety of expenses. “These include the appraisal fee, attorney fees, inspection fees, loan origination fees, credit report fees, recording fees, underwriting fees, and lender's title insurance,” says Daniela Andreevska of Mashvisor, a real estate data analytics company. “These can add up to between 2 percent to 5 percent of the sale price,” Andreevska noted. Costs will vary based on where you choose to live, the property you buy, and the type of loan you select. And don’t forget that you will need to put money down on the new property.

If you’re not buying a brand-new property, you can expect that there will be some basic fixes and repairs, Andreevska says. “Make sure to get both an appraisal and an inspection even though they cost money, as this will give you a good estimate of how much you will need to spend to fix up your next home,” she says.

If you plan to keep your current home as an investment property, remember to factor in the costs and labor associated with such a decision, says Kalen Omo of Kalen Omo Financial Coaching. “You must consider whether you want to be a long-distance landlord or not,” Omo noted. “Being one may involve you making visits to your rental property to address problems, so determine whether you want to manage the hassle of such an investment.” What’s more, those who don’t want to handle maintenance and repairs themselves, may have to pay a property manager.

Moving to a new location will most likely include an overall cost-of-living change. “This is a hidden cost that needs to be explored before a retirement location is selected,” says Susanna Haynie, broker owner of Co-REGroup - Colorado Real Estate, in Colorado Springs. “This can be determined with many online cost of living calculators or by connecting with resident groups on Facebook.”

Not everyone wants to deal with the hassle of owning a home during their golden years. Those who plan to rent should keep in mind that they’ll likely have to pay a deposit once they sign a lease, says Andreevska of Mashvisor. “While this money is refundable, you will have to factor it in your initial expenses when moving to a retirement destination.”

As you review new homes, remember that if you choose a bigger property in that cheaper location, your utility costs may increase, says Exantus of BankMobile. “And there may be things that you didn't have to pay for before that you are now expected to pay, like sanitation and garbage pick-up,” he says.

Lengthy plane rides can grow more difficult as you age, so think carefully about where you choose to relocate, advises Smayda of Merrill Edge. “Texting and video chat make it easier to stay in touch with family members and friends, but if you want to see them in person regularly, choose a city that will enable you and the people you care about to travel back and forth easily and affordably.”

Access to quality health care is paramount in retirement. Be sure to understand the relative cost and quality of care in the city, town, or country where you hope to retire, Smayda adds. Are health-care professionals available locally? Will you have to commute a significant distance to reach qualified health care professionals if you’re moving to a small town or foreign country? All of these costs should be kept in mind.

As you transition from your old home to your new one, remember that there will be a brief portion of time when you will likely have expenses in both places, says Julia Carlson, founder and CEO of Financial Freedom Wealth Management and author of the book “Fit Money.” “Many expenses will overlap between the old location and the new location, such as having final utility bills due at the same time new utility bills will be due,” Carlson says.

Will using public transportation be part of your new life? Make sure you know what the options are in your future city or town and what the associated costs are, says Carlson of Financial Freedom Wealth Management. If you have a disability or limited mobility, you’ll also want to consider cities that offer wheelchair-friendly transit.

Planning to relocate internationally for retirement? Unless you have citizenship in the country you have chosen, it’s likely you will need to apply for the appropriate visas to immigrate, says Jennifer McDermott, consumer advocate for finder.com. “While the process is certainly easier in some places than others, it’s recommend you get professional help from an immigration attorney who has working, detailed knowledge of the process,” McDermott says. A lawyer’s assistance can be costly but can often save you a great deal of time, and potentially money on incorrectly filed applications.

Transferring your hard-earned retirement nest egg overseas can be costly depending on the provider or bank you choose, says McDermott of finder.com. Some charge a flat fee, while others charge a percentage of the amount being transferred, which can be significant if you’re moving a large sum that you’ll need to live off of. “Keep in mind that the most convenient option, such as your current bank, is rarely the best value, so do your due diligence with comparing money transfer providers,” McDermott advised.

If you’re an American citizen, the rules for filing your taxes remain the same whether you live here or abroad, McDermott says. “On top of your U.S. tax obligations, you may also be liable to pay taxes in your newly adopted country, doubling up on your annual government payments,” she says.

That next move you make could very well be your last move, says Omo of Kalen Omo Financial Coaching, so make sure you understand how your income is affected, particularly related to investments and your estate tax, also known as a death tax. Conduct some research to determine whether you’re moving to a tax-friendly or a tax-heavy location.

When relocating, a retiree might lose a tax benefit, which would increase the monthly cost of living in their new home, says Haynie of Co-RE Group-Colorado Real Estate. “For instance, Colorado has a senior tax exemption and a disabled-veteran exemption, which is lost upon relocating,” Haynie explained.

While there can be a great deal of excitement associated with moving somewhere new for retirement, particularly to an exotic or international destination, it’s also important to consider the stress associated with a move, says Haynie, broker owner of Co-RE Group-Colorado Real Estate. “Relocating is among the top three stressors, “ says Haynie. “Consider how a move will impact your overall health.”

Before deciding to relocate somewhere new, you should visit first and experience the people, culture, and more, says Carlson, founder and CEO of Financial Freedom Wealth Management and author of Fit Money. “Make sure you can fully answer questions such as: How far you would be from the places you'd frequent, such as grocers, gas stations, and restaurants?” Carlson says. “Go into some of them and gauge the local pricing. Do things cost more than you're used to?” What kind of activities will be within a reasonable distance? And what is the average cost? Is there enough that is affordable to keep you busy? These are all important considerations.

Make sure you consider the sentimental cost of moving because it will take a lot of money and effort to undo your decision, says Jamie Hopkins, director of the Center for Retirement Income at The American College of Financial Services. “For many people, relocating and moving out of the family house is more than just a financial decision, it is an emotional decision,” Hopkins says. “The house often represents years of the homeowners’ lives and is full of memories. Once you sell the home and move out, it’s unlikely you will be able to buy it back in a few years if you don’t like the new location.”