The ‘Other’ Retirement Question

Most retirement planning focuses on the “when,” and then moves quickly to “how much.” But there’s a question that often doesn’t get asked—at least not directly—that has a huge bearing on both.

That question is “where.” 

More specifically, “where… do you plan to retire?” Because that decision can have a huge impact on the “how much”—and more.

In fact, people talk a lot about where they plan to live when they retire—though it’s often more about climate or proximity to family. But data suggests that however much we may talk about moving, most stay put. Indeed, and despite any number of annoying clickbait slideshows that purport to illustrate the “best” places for retirement, in a survey conducted in 2018, AARP found[1] that 77% of those age 50 and older either “somewhat” or “strongly” agreed that they would like to remain in their communities for as long as possible, and 76% of that group indicated they would like to stay in their current residence for as long as possible. Nearly half of adults age 50 and older say they will never move.

I haven’t moved a lot during my life, but like many, perhaps most, of you, I have lived in enough different places to appreciate the difference both in access to things like healthcare facilities and public transportation, as well as the huge impact that differences in real estate prices and taxes can make on the costs of living.[2]

Those realities are often glossed over in aggregate assessments of retirement income adequacy—because, while they are real and acknowledged (at least when asked), it’s simply too individualized a calculation to present in a concise manner. Frankly, most assessments of future retirement spending rely heavily on assumptions based on pre-retirement spending—and while there are certainly acknowledged differences in the two, the application of assumptions (such as applying a percentage of pre-retirement income to determine adequacy) likely holds up better when the potential shifts in costs are muted by a lack of major shift in underlying assumptions about where you’ll be spending it.

The reality is that there are plenty of “anchors” in life, but when it comes to picking up and moving, whether we’re talking about costs of relocation, the ties of family (parents needing care, or a desire to be close to kids and/or grandkids), sluggish housing markets or just sheer inertia, those looking for reasons to retire “in place” can find plenty of justification to do so (or perhaps more accurately, to put off the decision to do so).

But that, as they say, was “then.” Among the many other potential shifts in assumptions going forward may well be the decision of where to live—not only in, but heading toward—retirement. Some may well have the opportunity to live somewhere different now that they didn’t have, or didn’t think of having, “before.” Some may have that “choice” thrust upon them. And some may no longer be as comfortable living hundreds of miles away (and across state lines), from those they love.

It is, of course, too early to know how current events may change things, if at all. But for those heading toward—or helping others toward—retirement, it may be time to bring “where”[3] into the conversation.

Footnotes

[1] J. Binette and Kerri Vasold, Home and Community Preferences: A National Survey of Adults Age 18+ (Washington, DC: AARP Research, 2018).  

[2] Data also suggest that where you live can also affect your life expectancy, and while a later in life move might not make that much difference, it’s a factor worth keeping in mind.

[3] To that end (H/T to T. Rowe Price’s Josh Dietch), I was recently introduced to an intriguing planning calculator—the Elder Index, a tool developed by the Gerontology Institute at the University of Massachusetts. While it of necessity employs certain assumptions, and draws on data sources that some might question, it includes the cost of housing, health care, transportation, food, and miscellaneous essentials—and allows you to compare different locales, down to the county level. You can check it out at http://bit.ly/elderindex.