This article is the continuation of a two-part series. The first part highlighted the common errors people commit and the foremost aspects to ponder, even prior to the concern of expenses. Considering your future residence, undoubtedly, financial aspects play a pivotal role, particularly for those in their golden age who rely on their savings, aiming to make it last their lifetime. However, it’s not as straightforward as one might think.
My earlier article presented the methodology to assess downsizing during retirement, emphasizing what I perceive as the main influences on one’s final destination of residence: health and social ties. I’d like to stress that the expense of your new home should be the chief determinant only if necessitated. Let’s imagine that you’ve given the green light for health and relationship aspects in your prospective locations and are now at a stage to evaluate costs. Below, I put forward seven essential elements to contemplate:
Firstly, accommodation expenses are about more than mere numbers. All other categories that we shall discuss provide more concrete figures than housing costs, given that the true cost of accommodation encompasses more than just the market price. For instance, dwelling in cities carries higher costs. Areas such as the Northeast and West Coast are notoriously pricy; zones further from these locales are generally more affordable.
Secondly, the subject of inheritance or estate taxes can present a wide range of disparities. As of 2025, less than one-third of United States jurisdictions impose an inheritance tax, an estate tax, or both. As the federal estate tax exemption has grown substantially, states have been moving away from this type of taxation. That being said, for many clients residing in high-tax states, it still remains an important consideration.
The third factor to weigh is a comparison of income tax rates among states. Now, there are nine states that have abolished income taxes. A lack of state income taxes may suggest that the state leans toward a favorable tax environment. However, this often translates into augmented taxes in some of the upcoming discussed categories.
Moving on to the fourth criteria, property tax rates indeed carry significance. Often, low income tax rates are compensated for by high property tax rates. Florida and Texas serve as suitable examples here.
The fifth point is the tax rules pertaining to pension and retirement accounts. Typically, apart from your home, your retirement savings form your largest assets and the way they are taxed can greatly influence your total income.
Proceeding to the sixth criteria, you’ll find that the majority of states abstain from taxing income derived from Social Security. Yet, there are exceptions, for instance, Colorado, Connecticut, and Vermont. Like much else discussed here, there’s no absolute rule. Even most of the states that refrain from taxing Social Security income have established income brackets or adjusted gross income bands for these tax benefits.
Finally, think twice before allowing the absence of sales tax in a state to sway you. I argue that the emphasis on sales tax is often exaggerated. A slight variance in percentages ought not to be a deciding factor.
In conclusion, when reflecting on the financial implications of your accommodation in retirement, it’s crucial to look beyond the mere cost of the house. The impact of tax rules can be quite hefty for retirees, thus, it’s always a prudent move to factor them into your decision.
The post Tips to Evaluate Costs When Planning for Retirement Residence appeared first on Real News Now.
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