Have you ever wondered whether your favorite winter vacation destination would be a great place to retire? A warm climate, relaxed lifestyle, and happy memories have tempted many a retiree to pull up stakes and load the moving van. In fact, AARP reports that about 234,000 retirees moved to a new state in 2022.

While it’s great to dream about relocating, choosing to move is a complicated and very personal decision. Making the proper choice requires understanding and prioritizing the factors that will have the greatest impact on your happiness and well-being now and in the future. Getting it right takes knowing yourself pretty well.

1. Vacationing in a place is different from living there

Vacationing in a town or city you love and actually residing there are two very different experiences. A short stay can give you a false sense of what an area is like. It’s wise to visit the area multiple times during all four seasons to determine whether the climate and lifestyle are really right for you. Better yet, rent an apartment or a home for an extended period before you commit to a move.

2. Seeing is believing

You’d be surprised by the number of pre-retirees who read about a particular locale on a top ten list and decide to move there without seeing it in-person. I know individuals who’ve done this and later regretted their hasty decision. Correcting their mistake by moving back home or to another city involved sacrificing time, money, and energy at a time in life when they had hoped to take it easy.

Reading about the top places to retire can be very enjoyable, but there’s nothing like experiencing a city or area for yourself. Use lists and rankings as the starting point for further investigation and discovery.

3. Saving money isn’t the whole story

Some retirees decide to relocate to another state based solely on how much money they’ll save on taxes and living costs. While saving tax dollars is important, it’s not the only consideration. Whenever clients focus exclusively on this topic, I like to ask the following questions:

  • How will this move impact your relationships with family and friends? How far will you have to travel to see them and what will the transportation costs be? If you can make the trip now, will you be able to do so 10 years from now?
  • Is high quality healthcare available, and do the best doctors, clinics, and hospitals in the area accept Medicare?
  • Will you fit in socially and politically? Are the state residents “your kind of people” with similar viewpoints, values, and interests?
  • Is the crime rate low? Will you feel safe at home, in your car, and on the street?
  • If you want to work part-time, how good is the job market?
  • While you may be able to drive now, can you get around if you no longer have a driver’s license? Is the city walkable or is public transportation available?
  • How much lower will the cost of living be? Are home prices and rents reasonable? Has a recent influx of remote workers driven up real estate prices to unsustainable levels?
  • Have natural disasters (especially hurricanes and floods) made homeowners insurance unavailable or too expensive?
  • What about utility costs?

4. Consider the total tax bite

Some retirees limit their financial considerations to income tax matters and choose a state simply because it has no—or very low—personal income taxes. However, the income tax benefit of relocating varies from person-to-person in proportion to 1) their income, and 2) the income tax policy of the state they’re moving from. A high-income retiree might save thousands of dollars a year in state income taxes by moving out-of-state, but less affluent retirees could see little impact on their tax bill and after-tax income.

As you’re researching state taxes, pay attention to tax rules that will apply to your projected sources of retirement income. State tax policies differ significantly with respect to interest, dividends, Social Security, and retirement plan distributions from annuities, 401(k)s, IRAs, and pensions. Be sure to consider property taxes too, along with state sales tax, and estate and inheritance taxes, then compare each one to what you’d pay if you didn’t make a move.

It’s also a good idea to check the fiscal health of each state you’re interested in. A large budget deficit raises a red flag about the probability of future tax increases.

5. Don’t drag your feet

While it’s important to weigh all the pluses and minuses of out-of-state relocation, be careful not to let the process go on too long. In my experience, clients who retire at 65 and can’t decide where to move by 70 will probably stay put. Consider establishing a timeframe for making a decision and honor it.