5 BENEFITS OF MOVING FOR RETIREMENT WHEN LIVING A FRUGAL LIFESTYLE

Living a frugal lifestyle means maximizing the value of every dollar and limiting expenses as much as possible. For some retirees, frugality is a necessity, as incomes are often fixed and life expectancy is unknown.

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However, if you’re a frugal retiree, there’s a simple step you can take that may stretch your retirement budget without requiring any additional income: moving. Here are five benefits of moving for retirement when living a frugal lifestyle.

Lower Cost of Living

The main reason why many frugal retirees move is to lower their overall cost of living. Everything from the price of gas to utilities, healthcare and groceries can be significantly different from state to state — and even from city to city — and this can make a big difference in your monthly retirement budget.

Saving even $200 per month on these items can add up to over $2,000 per year in savings. If you’re planning on renting a home or apartment after you retire, your savings could easily top $1,000 per month depending on where you live and the size of your rental. If living with family is an option, moving could both allow you to spend more quality time with them and drop your monthly rent to $0.

Lower Income Tax

While you can’t lower your federal income tax by moving to a different state, you may be able to knock down your state income tax by a considerable amount. Each state has its own tax system, and rates can vary dramatically depending on where you live.

If you’re looking for the most bang for your buck, move to one of the nine states that have no income tax at all. For 2024, those states are Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming, according to the IRS.

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If none of those states strike your fancy, there may still be a way to lower your income tax. California, for example, has a top tax rate of 13.3%, although it only applies to those with seven-figure incomes. Still, that’s considerably more than the 2.9% rate that applies to top earners in North Dakota, for example.

Even for more modest earners, large discrepancies exist among the states. If you’re filing jointly, for example, a $78,000 retirement income would face a 1.95% tax rate in North Dakota but a 6% rate in California, more than three times as much. 

Lower Property Taxes

Property taxes can vary considerably not just by state but even by individual counties. If you plan to own property in retirement, moving to a low-cost state can save you significantly, particularly if you have an expensive house.

Average effective property tax rates in Hawaii, for example, are 0.32% according to the Tax Foundation, just one-seventh the average effective rate of 2.23% in New Jersey. On a $500,000 home, that’s a savings of nearly $10,000 per year. 

Something that’s important to note, however, is that annual property tax increases are limited in some states until there is a change in ownership. At that point, taxes can rocket higher.

For example, in California, property tax increases are limited to 2% annually. However, if you buy a home in California, the home’s value will be reassessed to current levels for property tax purposes. In most cases, this will significantly boost the amount of taxes paid. This is something you should take into account if you’re moving to save on property taxes.

Lower Home Prices

According to Zillow, the price of the “average” house in America is roughly $346,000. However, as the oft-quoted saying goes, real estate is all about “location, location, location.” From state to state, and even within individual cities, home prices vary dramatically. 

For example, Fresno in California’s Central Valley has an average home price of $365,377, just above the national average. But homes in celebrity-studded Malibu, on the Southern California coast, average a whopping $3.39 million.

The good news is that if you lived in a high-priced area during your work career, you may be able to put literally hundreds of thousands of dollars in your pocket by simply selling your high-priced home and moving to a more affordable area. In many cases, you won’t even have to leave your state.

Better Weather

Better weather is a common reason why many retirees move. If you’ve worked your whole career in Buffalo or Chicago, for example — both of which are noted for their tough winters — the thought of living in the perpetual warmth of Arizona or Florida might be attractive. But in addition to avoiding the snow and frigid temperatures, moving to a warmer climate might actually save you some money as well.

Healthcare is one of the top expenses for retirees. Harsh winters can be tough on the body, particularly for older people, and can lead to more accidents from slips and falls. Moving to a state with a more hospitable climate also offers the opportunity to participate in outdoor activities like walking, jogging or biking year-round, all of which tend to keep people healthier.

Sunny environments can also be better for your mental health, as consistently gloomy weather may affect your mood. All of these factors can add up to an overall healthier life and correspondingly lower healthcare expenses.

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This article originally appeared on GOBankingRates.com: 5 Benefits of Moving for Retirement When Living a Frugal Lifestyle

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