Creating these budgets can be the difference between retiring in paradise or retiring into a nightmare.
Why American retirees are returning to work
A new study from the Employee Benefit Research Institute shows the rate of return to work among retirees in the United States.
When we talk about moving for retirement, the focus tends to be on the positives, like the nice weather, how much money you can save, and what new activities are available. While these benefits are certainly true, they don’t fully explain what retirement relocation is like.
Relocating comes with new costs that can wreak havoc on your retirement budget if you’re not careful. Here are five expenses you should prepare for before moving.
1. New taxes
If you move to another state or country, you may face taxes you’ve never paid before. For example, if you live in a state with no income tax and move to a state with an income tax, your annual expenses will change. If you move to a state with a Social Security benefit tax, you may have to get used to having a portion of your check lost to the state government.
Be sure to understand what new taxes you may incur in your new retirement city and budget accordingly. If necessary, talk to your retirement accountant to get an idea of how much you’re likely to pay.
2. Travel expenses
If you moved far away from your friends and relatives, you may want to return to your hometown and visit them after you retire. Prices can quickly add up, especially if you have to fly.
Using today’s prices as a baseline, you can create a budget by estimating how often you’ll be going home and how much it will cost to travel there and back. However, be aware that transportation costs may increase in the future. It’s a good idea to have a little cushion in case transportation costs go up faster than expected.
3. More expensive Medicare Advantage plans.
If you move to another region, you may need to switch Medicare Advantage plans. You won’t always pay more. It depends on where you start from and where you move to. But there’s no doubt that you could end up taking on more debt than you have in years past.
Learn what your options are and prepare by comparing available Medicare Advantage plans in the area where you plan to retire. If you move, you will be eligible for a special enrollment period that allows you to change your plan outside of the standard open enrollment period.
4. Increase in insurance premiums
Moving to an area with a higher cost of living or a higher risk of insurance claims can increase your retirement costs. For example, if your new home is more expensive than your old home, your homeowner’s insurance premiums may be higher than what you were previously paying. This is especially true if you move to an area with a high risk of natural disasters.
Researching and comparing rates from multiple insurance companies is the best way to find better insurance. It’s a good idea to save a little more in a retirement account for future home insurance costs.
5.New living expenses
Moving to a new area may bring you closer to your favorite hobbies, but it may also introduce new expenses. For example, if you enjoy fishing and plan to retire near a lake or ocean, you may want a boat for your retirement. But that means you have to pay for the boat itself, gas, maintenance, boat insurance, and possibly winter storage fees.
As you plan for your retirement, consider which activities may incur costs. Be sure to include these when creating your retirement budget.
If you forgot to include any of the above expenses in your retirement plan, it’s not too late to fix it. You may need to increase your savings rate or delay retirement a little to give yourself more time to save. It may not be ideal, but it’s better than using up your nest egg too quickly.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
