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. We talked with personal finance, real estate, and retirement experts from across the country for factors to keep in mind, but there's one thing that overshadows all of them until coronavirus vaccines have returned life to how it was in early 2020: the added complication and expense of pulling off a move when hampered by health risks, quarantines, and business and travel restrictions. Think all the more cautiously.

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If you own your home and will be selling it to move, don’t forget to factor in all the costs associated with the 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 the home, and landscaping.

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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. “For example, relocation costs, whether moving your belongings or furnishing a home from scratch, may be higher than if you moved somewhere domestically,” says Will Smayda, Consumer Banking & Merrill Edge Central Division Executive, Bank of America.

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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.

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In addition to storing belongings temporarily, you should be prepared to pay for temporary housing if you can’t find a permanent place immediately, Exantus says. Again, some advance legwork can help identify what those temporary housing costs may be — and again, until the coronavirus is eradicated from daily life, this will essentially double the work you're doing and heath risks you face.

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Just like selling your home, the purchase of 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% to 5% of the sale price.” Costs will vary based on where you choose to live, the property you buy, and the type of loan you select. Don’t forget that you will need to put money down on the new property.

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If you’re not buying a brand-new property, you can expect that there will be some basic repairs needed. “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,” Andreevska says. And consider how you might have workers in the space when there's still a pandemic to worry about.

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If you plan to keep your current home as an investment property, factor in the costs and labor associated with that. “You must consider whether you want to be a long-distance landlord or not,” says Kalen Omo, of Kalen Omo Financial Coaching. “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.” Those who don’t want to handle maintenance and repairs themselves may have to pay a property manager. 

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Moving 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.”

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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. “While this money is refundable, you will have to factor it in your initial expenses when moving to a retirement destination,” Andreevska says.

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As you review new homes, remember that if you choose a bigger property in that cheaper location, your utility costs may increase. “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 pickup,” Exantus says.

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Lengthy plane rides can grow more difficult as you age, so think carefully about where you choose to relocate. “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,” Smayda says.

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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 says. Are health care professionals available locally? Will you have to commute a significant distance to reach qualified health care if you’re moving to a small town or foreign country? All of these costs should be kept in mind.

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As you transition from your old home to your new one, remember that there will be a brief time when you will likely have expenses in both places. “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,” says Julia Carlson, founder and CEO of Financial Freedom Wealth Management and author of the book “Fit Money.”

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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, Carlson says. If you have a disability or limited mobility, you’ll also want to consider cities that offer wheelchair-friendly transit.

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Planning to relocate internationally? Unless you have citizenship in the country you have chosen, it’s likely you will need to apply for the appropriate visas to immigrate — and this is another thing the coronavirus has complicated. “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,” says Jennifer McDermott, consumer advocate for finder.com. A lawyer’s assistance can be costly, but can also often save a great deal of time and potentially money on incorrectly filed applications.

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Transferring your hard-earned retirement nest egg overseas can be costly depending on the provider or bank you choose. 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 says.

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If you’re a U.S. citizen, the rules for filing your taxes remain the same whether you live here or abroad. “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,” McDermott says.

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That next move you make could very well be your last move, 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, Omo says.

Related: Most and Least Tax-Friendly States for Retirees

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

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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 important to consider the stress associated with a move. “Relocating is among the top three stressors, “ Haynie  says. “Consider how a move will impact your overall health.”

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Before deciding to relocate, visit first and experience the people and culture. “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 — and probably easier to assess when travel isn't complicated by a pandemic.

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Make sure you consider the sentimental cost of moving, because it will take a lot of money and effort to undo a decision. “For many people, relocating and moving out of the family house is more than just a financial decision, it is an emotional decision,” says Jamie Hopkins, director of the Center for Retirement Income at The American College of Financial Services. “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.”

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