Research Carefully Before Pulling Up Stakes to Retire
Three years ago, retirees Elliot and Patricia Mininberg sold their 2,600-square-foot house in Chatsworth and bought a home nearly twice its size on 3 acres in Charlottesville, Va.
Thanks to the high-priced Southern California housing market, they were able to make the deal for almost even money. But the benefits of relocating didn’t stop with a bigger house.
The couple’s homeowner insurance costs were cut almost in half -- $1,200 versus $2,100, largely because they no longer had the need for earthquake coverage. Their auto insurance rate dropped (even though they both bought new cars after moving), and their income and sales tax rates plunged as well.
Add it all up and, Elliot Mininberg estimates, the couple is saving $11,000 to $14,000 a year.
“I actually had a spreadsheet and worked it all out,” he said. “It was quite a significant difference.”
Many people nearing retirement in Southern California will eventually do as the Mininbergs did, hoping to find a better quality of life in a small town where their dollars will go farther. But the decision to pull up stakes shouldn’t be taken lightly.
Leaving behind social networks such as friends and family -- or even just the familiar doctor, bank or coffee shop -- can prove unsettling for many seniors, who sometimes end up moving back, said Steven Vernon, a Los Angeles consultant and author of “Live Long and Prosper,” a book about financial planning for retirement.
“From a pure financial point of view, moving is a good idea,” he said. “But if you look at research of what makes people have a happy retirement, it’s that they have a vital, active social network. If you leave that network, you might not be as content.”
The first step should be a thorough analysis of the pros and cons, Vernon suggested. Consider how access to friends, family and healthcare and other vital services will change and whether you have the disposition to establish new relationships and volunteer activities and to thrive in a new community.
Those still interested in moving need to research, research, research, said Warren Bland, a geography professor at Cal State Northridge and author of “Retire in Style: 60 Outstanding Places Across the USA and Canada.”
Bland looked at 12 criteria -- including climate, landscape, crime and access to healthcare -- when considering what cities to include in his book. His picks include Madison, Wis.; Prescott, Ariz.; and Charlottesville, the central Virginia city where the Mininbergs relocated.
Those who want to research on their own would be smart to start with something big, such as weather, to narrow the field, Bland noted. An aversion to hot, humid summers would rule out the Gulf Coast of Texas, for example, and people who can’t stand frigid winters should avoid New England.
Because good healthcare is important to most seniors, it’s also smart to make sure that there’s a hospital nearby. And if the retiree has any chronic conditions, he or she should also research the availability of specialists.
Elliot Mininberg added another requirement in his search -- proximity to a university. He figured that being in a college town would guarantee a more cosmopolitan atmosphere and access to reasonably priced restaurants and cultural activities. Charlottesville is home to the University of Virginia, where Mininberg and his wife take classes. They also have joined a university-affiliated country club.
If a primary goal is to save money, Bland said, people need to look carefully at factors including housing costs and taxes and realize that appearances can be deceiving.
For instance, many California retirees think they’ll save a bundle on taxes by moving to the state of Washington, which has no state income tax, Bland said. But what they don’t realize is that property and sales taxes are relatively high, a situation that can take away any advantage.
Some other states impose high excise taxes on gasoline, alcohol, cigarettes and even recreational activities, he added. But some relatively high-tax states give retirees special deductions and credits that can make their tax obligation unusually low, Bland said.
Information about taxes -- and even the cost of groceries and utilities -- is publicly available, he said, so anyone serious about moving should be prepared to do research on the Internet or at a library.
Of course, the biggest potential savings in moving from major metropolitan areas, such as Los Angeles, San Francisco and New York, is in the cost of housing. Bland noted that a home that costs $700,000 in Los Angeles or $1 million in Manhattan is likely to cost $150,000 in Thomasville, Ga., a quaint retirement community just north of Florida, for instance.
But because the transaction costs in real estate are so high -- about 7% of the purchase price -- it’s important to pick the right home in the right neighborhood the first time around.
The only way to make a smart choice about neighborhoods is to go there, experts say.
Retiree Mininberg agrees, noting that he would plan on making two trips of at least a week’s duration, during different seasons, to each community that was being seriously considered.
“See what the weather’s like, whether you like the restaurants. Walk the neighborhood, and see if people are friendly when you pass them on the street,” he suggested.
When the choices have been narrowed to just one or two, Bland said, the trips should last at least three weeks. He also recommends checking out crime rates and traffic and talking to real estate agents and prospective neighbors.
Before buying a house, Vernon said, he would stay in the targeted neighborhood several months.
“Find a long-term rental,” he said. “It might seem disruptive to live three or six months in another community, but think of how disruptive it would be if you sold your house, moved and hated it so much that you moved back.”
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Kathy M. Kristof, author of “Investing 101” and “Taming the Tuition Tiger,” welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For previous columns, visit latimes.com/kristof.
