Moving in Retirement? 5 Things to Ponder Before You Pack

More than 338,000 Americans moved for retirement in 2023, according to a January study from HireAHelper, a moving-services marketplace. And a quarter of them changed states, the study found.

Relocating in retirement isn’t simple. There are things to ponder, like whether you need new health insurance, how your new state taxes your income, whether a city has good health care and whether the culture is a match.

Kyle Newell, a certified financial planner (CFP) in Winter Garden, Florida, has a client who moved from Tampa, Florida, to Martha’s Vineyard in Massachusetts, where she lived for six months before deciding she wanted to move to Minnesota to be closer to family.

Thankfully, she made money on all the buying and selling, says Newell, who encourages clients to spend time where they plan to move to make sure it’s the best spot for them. It could be that you love the feeling of a certain place, he says, but it's because you associate it with being on vacation, and living there is different.

Here are some things to think about before you start bubble wrapping your breakables.

1. Income taxes are just the starting point

Clients often ask David Berman, a CFP near Baltimore, about moving somewhere cheaper in retirement.

“It usually starts off very benignly: ‘Oh, you know, Florida doesn’t have an income tax and Maryland’s is eight and a half,’” Berman says. But when they do the math, taking into account things like property taxes, cost of living and even estate taxes, the difference often isn’t as large as clients expect.

Berman recommends talking to a professional before making a state jump, especially if you’re making other transactions before or after, such as the sale of a business. “Some states are more aggressive than others about chasing after their residents who are establishing residency elsewhere,” he says.

This also applies to people buying a second home and trying to declare residency there. If you live in a state like New York or New Jersey and try to establish residency at a second home in Florida, expect an audit, Berman says. “They are definitely looking for people who are fudging it,” he says.

2. You could get a Medicare do-over

If you have Medicare Advantage and you move out of your plan’s service area, you get a chance to reset your Medicare coverage. You can choose another Medicare Advantage plan or return to Original Medicare and — here’s the kicker — get another shot to sign up for Medigap. You typically have to sign up during Medigap open enrollment, which only lasts six months after you're 65 and have Medicare Part B. (And Medigap can be tougher to buy later if you have health issues.)

“We call this the nuclear option because this is one of the few ways to get out of a Medicare Advantage plan later in life if a Medicare Advantage plan is no longer working for you,” says Melinda Caughill, co-founder and CEO of 65 Incorporated, which offers Medicare guidance. “You will have a guaranteed issue right to get a Medigap policy.” This means companies must offer you a plan at the same pricing as everyone else, regardless of health issues.

If you have Original Medicare with a Medigap plan, in most cases, that Medigap policy will follow you and take on the policy pricing of your new area. If you have a Medicare Part D prescription drug plan, you will need to choose a new plan if you’ve left the service area. And don’t forget to notify all the companies involved in your health care and/or dental coverage, as well as the Social Security Administration, about your move.

3. Renting first might be smarter

Unless you are super familiar with a location — in all seasons — be cautious about buying a home right away. “We try like crazy to talk our clients into renting for a year,” Berman says.

If you buy a house and have to sell it a year and a half later because you made the wrong choice on a city or neighborhood, the transaction costs will be substantial, Berman says. You’ll also owe capital gains taxes on any profit on the home sale if you’ve lived there for less than two years.

Thomas Cook, a CFP in Knoxville, Tennessee, has retired clients who recently moved to the state but are thinking of leaving. “They ultimately decided that Tennessee was not the right fit for them,” he says. But since they bought their home and prices have climbed since their purchase, they face paying capital gains taxes if they sell too soon.

4. The health care system needs a look

Access to health care should be a variable on your list. Crystal McKeon, a CFP in Houston, has a retired client who moved abroad and was diagnosed with cancer six months later. The country in question is equipped to handle it, but “it could’ve been very bad,” she says.

It’s important to think about not just your primary care doctor but also the general medical facilities available to you. “Otherwise, you could end up traveling pretty far to get good health care,” McKeon says.

5. Culture is important

Retirement happiness is also about the intangibles. Retirees who consider themselves happy spend significant time on interactive and social activities, according to a March report from life insurance company MassMutual. What’s the culture like? Will you be around people you enjoy?

Berman recalls a client who moved from Maryland to Arizona about five years ago — and is moving back due to the weather and the social climate. “One of the things to consider is the political dynamic, because it’s so contentious in today’s world,” he says. “What makes life enjoyable? The people around you, and the environment, and feeling good and safe. It’s definitely an issue.”