Retirement ‘grass’ may not be greener in another state

The Bakersfield Californian
February 18, 2011

Blame it on the winter fog and rain. Or maybe it is just spring fever. Whatever the cause, in recent days, several boomer clients have vowed to beat feet out of Bakersfield when they soon retire.

I can understand some of their concerns. California’s and Bakersfield’s image has been battered in recent years. Bakersfield is regularly listed among the nation’s cities with the most polluted air. Economically battered by the persistent recession, Bakersfield was recent ranked 20th on Forbes magazine’s “misery” list.

In December, TopRetirements.com named California one of the 10 worst states in which to spend your retirement. California would have ranked “the worst,” but Illinois received that honor because it’s colder in Illinois.

There’s no shortage of Bakersfield critics, who massage data to smudge the city’s image with a ranking on some “worst” list.

As someone who grew up in Bakersfield and who chose, as an adult, to make the city my home, my view of Bakersfield is more favorable. In fact, I am downright fond of the city.

But in recent days, I have struggled to convince some of my financial planning clients to share that view. While I’m not trying to talk them out of moving, I am trying to make them think about what they expect and need in a retirement residence.

John Brady, whose TopRetirements.com dumped on California, said it best: “The 10-worst-states-for-retirees list might be a good list for one person, but not for [another].”

In other words, deciding where to live post-retirement depends on a lot of factors, many of them personal.

The TopRetirements.com study focused mostly on states’ fiscal health, taxation and climate. But other factors to consider include: crime; recreation; transportation; health care; cost of living, including housing; education, including college; cultural resources; susceptibility to natural disasters; proximity to friends and family; and fitting in socially, politically and religiously.

But even with “clear cut factors,” such as taxation, there can be a difference of opinion.

Take, for instance, New Jersey. TopRetirements.com placed New Jersey on its “10 worst” list. However, Kiplinger placed New Jersey on its list of “10 most tax-friendly states for retirees.”

And it is wise to heed the warnings of TopRetirements.com and other financial think tanks, including Kiplinger, to not look just at tax rates when deciding where to live in retirement.

With fiscal problems spreading like a prairie wildfire to state governments throughout the nation, a tax-friendly state today – one that does not have a personal income tax, or has a low property tax – can become an unfriendly one tomorrow.

The old adage applies: There is no such thing as a free lunch. It takes tax dollars to run a government. States in fiscal distress, such as California and many others, will likely do two things – cut government services and increase taxes.

If you are thinking about moving to another state after you retire, you need to do a lot of research.

  • Identify your top priorities. What are you looking for? Do you want recreation, continuing education, a second career, health care, climate change, lower cost of living, specialized activities? Make a list.
  • What is your post-retirement income? Have you saved enough to move? Do you own a house? Can you sell it? Will you need the proceeds from the sale to pay for your move?
  • Will you need to work, at least part-time, in retirement? Are you considering moving to a community where the job market is “friendly” to older workers?
  • Determine the “fiscal health” of your potential relocation state. The Internet is a wonderful tool. Conduct an Internet search of the state’s newspapers. Read political and financial stories that suggest taxing and cost of living trends.
  • Use searchable Internet tools to help sort options.

U.S. News has a Website (http://money.usnews.com/money/retirement/best-places-to-retire) that sorts “best” retirement locations according to specialized interests: military retirees; single seniors; most retirees; historic places; affordable mountain scenery; and best (and worst) places to build a nest egg, launch a second career, reinvent yourself, downsize, love wine and find affordable long-term care.

The Kiplinger Website (http://www.kiplinger.com/tools/retiree_map/) has a clever interactive map that features tax “heavens and hells” for retirees. Select options for the most tax-friendly and unfriendly states, locating states with no income tax, no sales tax, and the lowest tax rates in several categories, including property tax.

  • Visit your potential new home. Plan vacation trips at various times of the year. Some retirement community developers, such as Del Webb, offer discounts on rentals and free access to community recreation attractions to entice buyers.
  • Take your time. There’s no hurry. And who knows, after doing your research you may discover that with just a little watering, your retirement grass may be greener if you stayed in Bakersfield.