It’s National Save for Retirement Week! Established by Congress in 2006, this week is all about retirement savings. Whether retirement is around the corner or in your distant future, we’re sure you’d like to see those extra dollars in your bank account when the time comes! Navy Federal will observe this “holiday” by sharing financial tips to ensure you ride off into the sunset with healthy, stable savings.
According to a study by Merrill Lynch and Age Wave, 64 percent of retirees have moved or anticipate moving in retirement. Why? To be close to family members and to reduce living costs. If you’re a recent retiree or are retiring soon, ask yourself these few questions before making big moving plans.
How will a move impact my taxes?
Retirement Income Tax
Moving to a new state that doesn’t tax retiree income, such as Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, may be really appealing. That means the money you deduct from your pension, Individual Retirement Arrangement (IRAs) and 401(k)s won’t be subject to income tax at a state level. But before you pack your bags, consider the other tax implications – such as areas these states are using to make up for lower (or no) retirement income tax. As a result, sales or property taxes may be a lot higher than you expect. If these states don’t appeal to you, some states have income tax but exceptions for those receiving federal, military, and in-state government pensions.
If you decide to buy a new home when you move, it’s likely your property taxes are going to differ from what you’re currently paying. Even a move into a new town could cost (or save) you hundreds of dollars a year. A quick Internet search will give you an idea what to expect, and you may consider moving to a neighboring area because of the tax incentives. Double-check and see what areas have reductions or exemptions on property taxes for senior citizens.
Social Security Taxes
Depending on how much you’re eligible to receive, you may be paying federal and state income tax. Factor this in if you’re not currently paying state taxes, as this could take a chunk out of your income.
Should I consider moving abroad?
This may be the right financial move for you since the cost of living in many foreign countries is much lower than in the U.S. Like any other relocation option, you’ll need to take some unique factors into account.
Moving abroad may impact your access to healthcare. The U.S. is generally thought to have some of the highest quality medical care in the world, and moving abroad means you won’t have access to your normal doctors. You should also keep in mind that Medicare coverage isn’t available if you move outside the country. If you have Medicare, you’d have to return to the U.S. for care or pay any medical expenses out of pocket, which is potentially a budget killer.
You’ll be subject to currency exchange rates to convert your U.S. dollars into local currency, depending on where you move. If your nest egg is in USD, and your new home doesn’t have a favorable rate, you may have less to live on than you think.
Many retirees end up staying right where they are but if you decide to relocate, choosing where to live can be the toughest part.
So where will you decide to spend your golden years?
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