By: Joe Delaney
You’ve spent time and energy asking yourself how you’re going to retire: how to structure your investments, how to set up an estate plan, when to stop working. But there’s one aspect of retirement planning that is all too often overlooked.
Where will you go?
It’s a serious question with huge implications for your quality of life in retirement. Yet, it often takes a backseat to other considerations. It can feel like something that will sort itself out.
It will. But just like everything else, you’ll wish you had started thinking about it earlier.
Why You Need to Ask “Where?”
Not asking this question means making a lot of assumptions that may not be accurate. For example, you might assume that you’ll prefer to stay where you are until the moment feels right. Or that wherever you end up will be fine whenever you decide to go.
But consider the opportunity costs of going into this without a plan. Those costs might be financial; for example, our state of California is one of the highest-taxed in the U.S. Continuing to live here when you have your sights set on another possible destination may be an expensive mistake.
Those costs might not be primarily about money. Will you take off one day without considering the quality of healthcare in your new community? Have you considered how comfortable you’ll be with the politics of that place? Or what your new lifestyle will look like?
To help you get the conversation started, below are a few factors and places to consider both inside the U.S. and abroad.
Retiring in the U.S.
If you will continue to earn personal income in retirement, you may prefer to live in states with no personal income tax. Those include: Wyoming, Washington, Texas, South Dakota, Nevada, Florida and Alaska. As we mentioned above, California has the highest.
However, if you plan to own property, consider the 10 states with the lowest property tax rates. Interestingly, only one state shows up on both lists: Wyoming.
For access and quality of healthcare and the quality of public health programs, you can’t beat Hawaii. That’s according to US News & World Report, which rounds out the top 5 with Massachusetts in 2nd, followed by Connecticut, Washington and Rhode Island.
However, if “quality” is your top priority, Washington is actually ranked much higher than Massachusetts or Connecticut for that metric.
These days, all you have to do is look at an electoral map readily available online to get an idea of where to find like-minded people.
While we won’t go through the issues that often divide Americans here, it is worth noting that attitudes about sexual orientation is a significant factor for our clients who are same-sex couples. Financial considerations aside, carefully choosing a place where you will feel accepted is usually non-negotiable.
The most important aspect of lifestyle for many of our clients is climate. It’s often a health concern, but beyond that, it’s about daily living.
Do you love the idea of being in a place where you can walk the beach every day, all year long? Or is your perfect day one spent indoors, sipping hot cocoa and looking out over a snowy landscape?
Are you the kind of person who likes to be where the action is, who goes out shopping and dining and to entertainment venues? Or do you long for a quiet, remote place where you can write, read, meditate?
These things are essential to happiness, and they require planning: for the cost of insurance for living in the path of hurricanes, or for lawn and snow removal service, or for a host of other considerations. It’s a lot to think about, but it’s worth it.
If you’re excited about the idea of moving to a state without income taxes, you’ll be interested to learn there are entire countries where you don’t have to pay taxes on personal income.
There are four: the United Arab Emirates, The Bahamas, Bermuda and Monaco. While the United Arab Emirates is not often thought of by Americans as a vacation destination, Investopedia calls it one of the most attractive among Middle Eastern oil countries for its dining, entertainment and educational opportunities.
The other three are popular, beautiful destinations you may already be dreaming about. Now that you know you can earn income in these countries tax-free, it might be time to stop dreaming and start planning.
Natixis Investment Managers puts out an annual Global Retirement Index, which is one notable indicator of the best countries to retire to. While it does consider finances and a number of other factors, healthcare is a major factor that bumped the U.S. out of the top 12 for 2019.
Out of a possible 100% score, the top 5 scored extremely well on health. New Zealand earned an 83%; Ireland, 87%; Norway, 90%; Switzerland, 88%; and the #1 overall country in the index, Iceland, scored an 85% on health.
Of course, you shouldn’t take this to mean you can’t get good healthcare in the U.S. It’s worth noting that the U.S. did manage to rank 10th when health is isolated. But this does mean excellence in healthcare is certainly not exclusive to this country.
One of the most helpful aspects of International Living Magazine’s annual report, The World’s Best Places to Retire, is insider information about American ex-patriot communities. These are places you can go and find people with whom you can engage in familiar conversations about the state of the world.
Expat communities can be found all over the world, in pockets of Spain, Thailand, Peru, Mexico, Costa Rica, and many other countries. If other Americans are thriving there in retirement, you can have some assurance that the government is stable, you can speak your mind and freely engage with the local community.
Of course, part of the attraction of retiring outside of the U.S. might be getting away from politics and lifestyles common in the U.S. You may want an experience you can’t get without going abroad.
Retiring in another country opens up your golden years to engaging with other cultures far more deeply than you ever could before. You would have opportunities to learn about and participate in culinary arts, music and dance, or even anthropological study if you’re academically inclined.
If you think retiring abroad might be for you, or even if you think retiring to another state might be for you, don’t delay in planning for it.
If possible, don’t delay experiencing it either.
When Retirement Planning, Practice Makes Perfect
As we’ve written about before, it’s always a good idea to test out your retirement plan before you commit to it. Alan Spector calls it “practicing” retirement, and recommends starting five years before retiring if you can.
This covers a lot of ground, from dipping your toe into certain activities you hope to do in retirement – like running a small business or teaching – before you commit to them in retirement, to trying out hobbies and joining clubs.
Practicing life in the place you hope to call home permanently is definitely on this list. Begin carving a few weeks or months out of the years before retirement to experience that place. You’ll thank yourself for figuring out what feels like the wrong fit early, and for doing the “legwork” (not really work – it should be fun!) needed to find your ideal home and retirement life.
Go Beyond the Basics in Retirement Planning
Hopefully, we’ve gotten you thinking about retirement in ways you haven’t before. Or at least we’ve gotten you thinking about the question of where to retire seriously enough that you’ll start a serious conversation.
Here at Lifeguard Wealth, retirement planning is never a dull exercise that involves nothing more than doing math and pushing paper around. It’s about fulfilling your dreams and enjoying the quality of life you’ve worked so hard to achieve.
Contact us today. We couldn’t be more excited to help you go beyond the basics of retirement planning to discussing your dreams about the places you might go.