Ending workaday life at a younger age isn't for everyone, but it favors those in high-cost areas.
One Secret to Clocking Out May Be a Moving Van
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| College town: The small-town atmosphere, charm and college population of Ole Miss give a cosmopolitan feel to Oxford, Miss. (Lance Murphey for the New York Times) |
IT seems like bait and switch. People who spent their working lives believing that they could retire at 65 or so are looking at their financial statements and thinking that it can't be done. The recession -- and maybe their own spending -- took too big a bite out of their balances
Many people are willing, and even eager, to keep working until they can build up their retirement savings. But for those who long to retire sooner rather than later, there is a way out of workaday life that can be leveraged to great advantage -- moving to a lower-cost area.
This route to an earlier retirement is not for everyone, and it favors people who live in high-cost areas and have considerable equity in their homes to tap.
Beyond that, deciding to sell a longtime home filled with memories can be emotionally wrenching. Leaving an area with a strong network of friends, neighbors, family and service providers is not easy. The sheer difficulty of selling a house, buying a new one and moving can be stressful -- and may not even be possible in this market.
But when the stars align, moving as part of a retirement plan can be an adventure that results in a richer life, both emotionally and financially.
Planning ahead is crucial to this strategy, and right now it also allows time for the housing market to improve. "Two years is not too long to be thinking about where you want to go," said Bert Sperling, founder and president of the Sperling's BestPlaceswebsite.
Differences between high-cost and low-cost (but still attractive) areas can be steep. According to Bankrate.com, which offers a free cost-of-living calculator, the average price of a home in the San Francisco area is $813,000; in Boston it is $419,000; and in Chicago it is $361,000. Compare these prices with Asheville, N.C., at $284,000; Lexington, Ky., at $259,000; and Boise, Idaho, at $254,000. Move to a smaller home in one of these areas and the price difference is even more substantial.
Most retirement research is tedious, but researching where you may want to live next can actually be fun. Narrow your search to several locations, and go on vacation to those spots to see if you like them, Mr. Sperling advised. Talk to the locals to find out what life is like there and which neighborhoods would suit you. When you get back, check out the local papers online and make sure that the area is not dealing with severe budget cutbacks or a high crime rate, he said.
Keep in mind that you can rent in a new area -- and perhaps rent out the house you now own -- before you commit, Mr. Sperling said.
Most people who move to a smaller town want to make sure they are close to a major airport, said Fred Brock, author of "Retire on Less Than You Think" (and a former editor at The New York Times). Given the increasing likelihood of health problems, they also want to be near high-quality medical care. "You don't want to move to a place that is beautiful and cheap but the nearest hospital is 100 miles away," he said
Mr. Brock, by the way, is retired at 66 and lives in Green Valley, Ariz., near Tucson, where housing, property taxes and car insurance are all much less expensive than when he lived in Montclair, N.J., seven years ago.
Look at the property taxes, sales tax and income tax in your prospective new area, and be aware that some states tax pension withdrawals while others don't. The websiteretirementliving.com is useful for making tax comparisons.
Keep in mind, though, that when it comes to taxes, the states will probably "get you one way or another," Mr. Sperling said, so don't base your decision solely on tax impact.
Smaller towns with big universities are attracting retirees with their lower cost of living and cultural amenities. "In a university town you have the benefits of a large city without the large city overhead," Mr. Sperling said. He named some examples: Oxford, Miss; Madison, Wis.; Boulder, Colo.; Burlington, Vt.; and Northampton, Mass.
Some retirees move back to the town or city of their alma mater. Susan Sadler Hayman, University of Mississippi, class of 1963, decided to do that in 2009. A Dallas-based flight attendant for American Airlines, she retired in 2004. Her second husband had died in 2001, and with her children and stepchildren grown, the four-bedroom house where she lived was too big, but she couldn't find a suitable house in her price range in Dallas.
Finally, she decided to move to a smaller house in Oxford, population 19,000, where housing prices, taxes and utilities are all cheaper than in Dallas, she said.
Moving to a smaller home stretches retirement savings even more and offers an excellent opportunity for downsizing. Ms. Hayman, who is now 69, said she went through every item in every room of her Dallas house, and asked, do I want to keep it, sell it or give it away? She now works part time as a certified life coach, with part of her work devoted to helping other people downsize, too.
The Dallas house held memories of her late husband and their family, and she misses her neighbors and the lovely old trees in her yard. But she has made new friends in Oxford, some of them through a William Faulkner study group and through a city newcomers' club. And she has become reacquainted with some of her old friends from college who have also returned to Oxford.
Her Oxford house has its own attractions: It is on a lake and has a big deck, and is still big enough for family members to visit, which they often do, flying into the Memphis airport an hour and a half away.
Some older cities like Pittsburgh and Buffalo might not immediately spring to mind as retirement locales, Mr. Sperling said, but they often have excellent services for older people, along with relatively cheap housing and cultural attractions.
Retire to Buffalo, which has one of the highest snowfall averages in the country? Mr. Sperling says climate is less of a concern to retirees than it used to be and that the traditional Sun Belt migration is less pronounced these days.
Don't rule out major metropolitan areas, Mr. Sperling said -- you can cut your costs by living in certain suburbs or an hour or two outside a big city, where home prices are considerably cheaper. Living close to the city center is less of a priority without a work commute.
That's what Jean Broom did, and as a longtime renter in Manhattan she had no equity to exploit. She used her savings from her job as a human resources professional to buy a two-bedroom condo in Evanston, Ill., near Chicago, for around $300,000, several years ago. That was much cheaper than if she had tried to buy a similar place in Manhattan.
"The prices were just so crazy in Manhattan I didn't have confidence that it was a place I could stay long term," she said.
Ms. Broom, 65, accustomed to plenty of cultural stimulation, enjoys being close to Northwestern University, where she has attended classes on Southeast Asian religions and the history of musical theater.
So for many who always took it as an article of faith that they could retire comfortably in their 60s, yes, it can still be done, with the right combination of savings or equity, combined with a willingness to move.
It might not be easy. "I don't want anybody to think I'm saying that it's just as easy to retire as it was five or six years ago," Mr. Brock said. It isn't. But it pains him, he said, to think there are people out there who believe they can't retire when they actually can.
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