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Where to live in retirement: A full breakdown

At a glance:

  • Retirement residential options: How's your health?

  • 55+ communities

  • Retirement residences: Location, location, location

  • Summary of where to live in retirement

Modern medicine has created an ironic "problem" relatively few of our elders had: The strong likelihood that our golden years could extend well past ten or twenty years after age 65.

This presents a set of challenges more daunting than our predecessors faced in contemplating and entering the end of the nine-to-five grind: We must manage our retirement nest eggs with financial savvy while making the residential and lifestyle choices that will bring us the most satisfaction.

Obviously, neither of those challenges can be addressed without taking stock of the other, but here we'll focus on living arrangements.

These days, folks are making changes in their living arrangements even before they are ready to retire. In fact, traditional "retirement" might not be part of the plan at all.

Iowa is the best state for retirement. (Graphic: David Foster/Cashay)
Iowa is the best state for retirement. (Graphic: David Foster/Cashay)

Retirement residential options: How's your health?

First things first when considering a retirement residence: are you factoring health into the decision-making process?

Even if good health and longevity run in the family, it's a mistake not to prepare for the obvious: You and/or your partner face the likelihood that totally independent living will eventually not be possible.

Be realistic and practical

We needn't dwell on worst-case scenarios. How practical will the living arrangements you're now considering be if you simply lose the ability to drive safely?

Be realistic — your current health and likely medical outlook should play a considerable role in a smart decision on where and how you live.

If, for example, crippling arthritis or Alzheimer's disease has been a recurring family problem, you'd be wise to think about a living situation now where increasing levels of personal and medical care are available once needed.

Look for a community that has a range of housing options from independent living for your current active lifestyle, to assisted living when you might need some extra help, to long-term nursing care, all on the same campus.

Such places often call themselves "continuing care retirement communities" (CCRCs). They allow you to "age in place" without the need for moving under difficult circumstances. Many offer a range of amenities, activities, and events that make them great places to live irrespective of health concerns.

You need a plan B

For various reasons, of course, a CCRC is not a practical option for everyone. One "option" you must have, however, is a "Plan B" — a strategy to deal with life if you become unable to live on your own.

55+ communities

There's a lot of buzz nowadays about "55+ communities," also called "active adult developments."

They are popping up all across the country — near cities and in the middle of nowhere.

These communities tend to be very social places that encourage interaction among residents. Many are oriented to particular activities or lifestyles.

There's a lot of buzz nowadays about "55+ communities." (Photo: Getty Images)
There's a lot of buzz nowadays about "55+ communities." (Photo: Getty Images)

Why the attraction?

A major attraction of the 55+ community is a child-free, grownup lifestyle—in many cases without the enormous school tax burden that typical residential communities must bear.

Experts agree that millions of Baby Boomers are moving to new homes within the first year after their youngest child goes off to college.

Enter the builders and developers. Rest assured, if you have a retirement dream destination, there is an active adult community there.

What do they cost?

It's not possible to offer much general guidance as to cost. Like anything else, the price tag varies widely according to the region and amenities associated with a given community.

As a rule of thumb, buyers can expect to pay a premium of about $20 to $30 per square foot for a house in a typical 55+ community, relative to the surrounding residential areas.

Keep in mind, however, that your home in a 55+ community will probably be a lot smaller and less expensive to maintain than the house in which you raised your kids.

The house will also likely be a ranch, designed for maximum accessibility — a cost-saving convenience later, when mobility may be more of an issue. Many developments are laid out to minimize the need for driving — another money-saving feature.

Finally, remember to inquire about and factor in the lower property and school tax rate you may enjoy as a child-free, 55+ community dweller, as well.

Remember the other costs

In shopping around, be sure to make apples-to-apples comparisons regarding activity fees and other costs. Some communities are all-inclusive — one "built-in" fee, for example, might buy access to all the golf you care to play on the community course(s).

That's probably a good deal for those who play a lot. Those who like the community but don't play golf at all, however, would prefer a "pay as you go" fee structure.

Don't lose sight of your finances

A move to a 55+ community — or any change in living arrangements — obviously involves big decisions that depend greatly on finances. With retirement benefits, it's easier to see where you stand just by looking at your periodic account statements.

The equity in your current home, however, is also probably a large chunk of your personal wealth, and that may be more problematic to assess if there is a slump in real estate prices.

During a market downturn, it's likely that prices in your areas of buying interest have fallen along with the home prices in your current neighborhood, but it's not safe to assume that the declines offset each other dollar for dollar.

So do a market analysis. You may decide to delay your contemplated move for a couple of years until there is some improvement in home sales. If so, that time can be well-spent doing all the research that should go into any final decisions.

Retirement residences: Location, location, location

There are at least two factors of primary importance that influence people's decisions about their retirement location — climate and proximity to family and friends.

These two considerations are often mutually exclusive, requiring some concessions or trade-offs. For couples, some tough compromises might have to be made.

Talk candidly

The important thing is to carefully think things through and discuss the issue of location candidly with your partner (and perhaps other important people in your life) at the start of the decision-making process. This should most definitely not be an after-thought.

For couples, moreover, it's a prescription for trouble if one of you is subject to arm-twisting by the other, or tries to be overly accommodating by agreeing to a location that will ultimately lead to unhappiness.

Try different scenarios

Spending a portion of the year in different places is a good solution for many people, and might not be as financially unworkable as it might seem.

For example, some folks have a modest home or condo in a warm region where they spend the winter or even more of the year. The rest of the time they're on the move — taking extended trips in a motor home or simply staying with family or friends in other areas.

Don't forget about taxes

One more point: don't forget to include state taxes — of all kinds — in the retirement location equation. This is a huge variable, highly dependent on the region in which you settle.

Almost all states have both an income tax and a sales tax in some form. A few have one, but not the other. (Florida, for example, has no income tax.)

Only one state has neither an income nor a sales tax — Alaska.

For more information

A brief article can do no more than get you thinking about how — and where — to best use the retirement nest egg you've worked so long to build.

But that crucial decision-making process has to have a first step. Here are a few useful Websites to get you started:

  • www.topretirements.com

  • www.after55.com

  • www.retirementliving.com

Summary of Where to Live in Retirement

The meaning of retirement is changing rapidly as advancing life expectancies, more residential options, and differing income situations combine to create a set of opportunities and challenges unique to the present age.

Soon-to-be-retirees have more options today than their predecessors. You no longer have to settle into the same place you lived while working.

On the other hand, you have to stretch your hard-earned wealth over a longer time period than your parents did.

Some creative planning and research, however, can ensure that you find a place to live that will bring the most satisfaction possible.

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

Read more information and tips in our Retirement planning section

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