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Why location matters in retirement

Transitioning to a fixed income after leaving the workforce may have you thinking about how to maximize your retirement income and savings. There are lots of tips out there for saving money in small ways – senior discounts, coupons, travel deals – but what if you want to make a more significant change? In this article, we’ll tackle a common question among recent and soon-to-be retirees: “How does where I live impact my retirement costs?”

The majority of money spent in retirement goes towards things commonly thought of as fixed costs, such as housing, taxes, transportation, and groceries. But these costs aren’t as inflexible as they might seem. If you’re willing to rethink where you live in retirement – especially if you’re open to moving to another state or region – you might be able to save a significant amount of money every month while keeping your current lifestyle.

Let’s look at a few examples:

Housing costs

Generally, housing in major cities is significantly more expensive than it is in smaller cities and rural areas. Makes sense, right? Most people are willing to pay a premium to live near good jobs with higher salaries. However, that trade-off may not be as important for you in retirement. For example, in 2018 an average 3 bedroom, 2 bath home in Seattle, WA costs approximately 70% more than an equivalent home in Prescott, AZ (i.e. if your home is worth $550,000 in Seattle, you can get a similar home in Prescott for $350,000). Rent is similarly different between the two locations. The median rent for a two-bedroom apartment is $2,069 in Seattle, while it’s $960 in Prescott.


Some states have more favorable tax rates for seniors, and some have lower rates for property and sales tax. By looking for a state that has low – or zero – rates for these, you may be able to save a significant amount every year.

For example, if you live in Oregon, a less tax-friendly state, you can pay up to 9% income tax, and retirement income (other than social security) is taxed at your top income rate. If you considered a move to Nevada, which has no income tax, you could save up to 9% of your income – retirement or otherwise – every year.

To learn more about how taxes change in retirement, check out the following article:

General cost of living

Outside of housing and taxes, the cost of day-to-day essentials is another area that can have a meaningful effect on your bottom line. It may not sound significant at first blush, but moving to a city with lower food, entertainment, and transportation costs can mean big savings in retirement.

For example, in 2018 moving from Baltimore, MD to Austin TX, could save you 25% on food costs, 8% on entertainment, and 11% on transportation. For a family of two who spends the average amount on food, gas, and movie nights out, this adds up to around $4,400 a year in savings.

If you’re open to moving or just want to see what the possibilities are, there are many resources available online to help. Here’s a quick guide to doing the research on your own:

1. Determine how much money you’d need to save each year to make a move worthwhile

Moving to a different place isn’t an insignificant change, so it’s a good idea to think about how much you’d want to save to make the move worthwhile before you start looking.

Maybe you’d be willing to move if you could save enough money for one extra international vacation a year. Or maybe your goal is to save at least $10,000 per year to put into a medical savings account.

Knowing this number up front can help you narrow down your options to locations that will help you meet your goals. You can read this article to learn more about building your retirement budget.

2. Do a little dreaming about your ideal location

Is there a particular place that’s always seemed interesting to you? How about a particular region of the country? Conversely, are there any places or areas that are a definite ’no’?

Come up with a short list of possibilities, and maybe a few places that are hard no’s, and write them down. You’ll use this liststart your search, and it may help you find undiscovered places that you’d be interested in.  

Can’t come up with a specific place or need help coming up with a list? Take this ten-question quiz to get a personalized recommendation. Or take a look at the Milken Institute’s Ten Best Cities for Successful Aging.

3. Think about what’s important to you when selecting a place to live

Outside of saving money, think about what qualities you’d want in your new hometown. Maybe warm, sunny weather is a must-have, or maybe you want to live near an international airport so you can easily travel. Pick your top three or four characteristics and make a note of them.

Here are some suggestions to get you started:

  • Access to good health care
  • Good climate
  • Proximity to an airport
  • Proximity to your family
  • Political compatibility
  • Social compatibility
  • Low crime rates
  • High levels of volunteerism
  • Investment in public transportation
  • Availability of arts and educational institutions
  • Minimal natural disasters

4. Pour a cup of coffee, put your feet up, and spend some time on the internet

Now that you know how much you want to save, you have a short list of locations you’re interested in, and you’ve thought about the qualities you want in a location, it’s time to do some research.

To start, compare the cost of living in your current neighborhood to your shortlist of possibilities. Bankrate and Nerdwallet both have tools that compare housing costs and daily expenses. Then, use Kiplinger’s state-by-state guide for retirees to see how taxes compare between states.

Next, take the characteristics that are important to you and see which locations make the top of the list. You might find some new candidates or affirm that your preferred location is the right choice:

By this point, you’ve hopefully identified one or two places that meet most of your wants, and can save you a lot of money as well.

Once you’ve identified a short list of candidates and you’re seriously considering a move, take a trip! Ideally, spend at least a week at the new locale. If possible, visit during different times of the year to see what life would be like in multiple seasons.

Even though you’re there for a short time, make it a point to live like a local. Check out the different neighborhoods, go to the grocery store, eat at local restaurants, and talk to as many people as possible.

Finally, make an appointment with a local real estate agent. Even if you’re not ready to buy, you can use their expertise to learn more about the community and maybe even narrow down your choices to the best neighborhood.

Related articles, tools, videos, and more

Renew has tons of great resources to help you figure out retirement.

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Not sure where to start?

Read our quick-start guide for help, including which questions you should be asking as you approach retirement.

Read our quick start guide

Group Created with Sketch.
Not sure where to start?

Read our quick-start guide for help, including which questions you should be asking as you approach retirement.

Read our quick start guide