Here are some things to consider before deciding to retire in another state

Thinking of retiring to another state? You’re not alone. A United Van Lines study found the percentage of people retiring to a new state rose to 18.3% in 2021 from 13.4% in 2015.

However, making the move is not a simple decision, as there are a myriad of financial and non-financial considerations involved. Financial advisors can help you cover all the bases.

“There are times [when] the financial implications are so significant that it would behoove someone to do the full analysis before packing up,” said certified financial planner Marianela Collado, CEO of Tobias Financial Advisors in Plantation, Florida. I don’t really want the ‘tax tail wagging the dog,'” she added.

Collado offers several important questions to consider, including:

• Cost of life: This can include health care, health insurance, rent, house prices, home insurance (especially in a place like Florida), property taxes, transportation costs, etc.
• Income taxes: This can really impact long-term retirement projections as you move from a state with no income tax to a state with state payroll taxes.
• Property taxes : Many states have much lower estate tax exemptions than the federal government, which could result in a state estate tax being applied to heirs.

The grass isn’t always greener on the other side, said Kevin Brady, CFP, vice president of Wealthspire in New York. He encourages clients to also consider the tax implications of changing domicile. If they have residencies in different states, there may be very strict requirements to be met in terms of days spent in a new state before clients can claim residency for tax purposes.

Benjamin Brandt, CFP and founder of Capital City Wealth Management in Bismarck, North Dakota, said “you want any potential tax savings to be icing on the cake.”

“There are very few tax free lunches,” added Brandt, who also hosts the Retirement Starts Today podcast. “They could be offset by other taxes.”

When it comes to health care, Brandt advises clients to be aware of possible restrictions in doctor choice, as doctors do not accept health insurance in some areas popular with retirees.

“It’s important to check with your health insurer to make sure you’re keeping benefits in your new location,” said Jeremy Finger, CFP, founder of Riverbend Wealth Management in Myrtle Beach, South Carolina.

“Private health insurance for young retirees and Medicare Advantage plans have specific service areas,” he said. “Retirees leaving the service area will have to find a new plan, which could mean more expensive premiums and increased payouts.”

Legal documents should also be reviewed to account for different laws in the new state of residence, Finger said.

Before moving out of state, people should think about any friendships or family connections they have in the new state, Wealthspire’s Brady said.

“Being further away from children or grandchildren can be emotionally difficult, not to mention financially burdened if frequent trips become the norm,” he said.

Customers should investigate leasing for a year or more in the desired new state to see if reality matches expectations, Brady said. “It can get tricky if the main residence in the ‘old’ condition is kept, but it’s a much cheaper alternative to buying a second home.”

It’s a big mistake not to rent before you move, Brandt noted in Capital City.

“As savers we are conditioned not to rent and throw money away, but buying and selling quickly is almost a guaranteed recipe for losing money,” he said. “It’s totally different to choose a neighborhood or to be on vacation.

“If you follow your kids, there’s no guarantee they won’t move anymore — or feel like they can’t move because they have to stay close to you,” Brandt added.

For its part, Finger at Riverbend noted that people sometimes move to get away from something and not get closer to it.

“But what matters is how you spend your time and who you spend it with,” he said. “It’s important to have a sense of purpose.”