Should You Move When You Retire? It’s probably better not to.

Should you move when you retire?

Obviously, it depends on many factors, but the answer is usually “No.” Like any decision, the best approach is to look at as many benefits and downsides as possible. What are the benefits of leaving, and what are the downsides of leaving? It’s that simple. I’m retiring from my clinical practice in about a month. The first question most people ask me is what I will do. That is the topic of a different blog. 

The next question is whether I will leave Minnesota. I ask them why I would do that, and they usually mention the weather and the taxes. Right off the bat, the answer is obvious. If I hated the weather and taxes so much, why haven’t I moved yet? I could have found a job in Florida. There are no income taxes there, and it is warm. I like working for Allina Health, but is there nothing comparable in Tennessee, another state without an income tax. What about Texas?

I haven’t moved to a warm climate without an income tax because I have more important reasons to stay in Minnesota. My wife is here, and my son is here. There it is. I care more about living with my wife and near my son than about the weather and the taxes. That formula will not change when I retire. When I tell people this, they ask what I’ll do when my wife retires. Same answer. I care more about living near my son than the weather and the taxes. I will not move from Minnesota unless my son moves. Fortunately, my wife agrees with me 100%, so I don’t have to contemplate what I’d do if my wife insisted on moving, though she wouldn’t be the woman I married if she preferred warm weather or lower taxes to being near our son.

Let’s think about the two big reasons people with money give when they move when they retire. First, the weather. I grew up in Miami, so I know a bit about moving to a new climate. Minnesota has nice summers and springs and perfect autumns. Winter is cold, though, so far; December this year has been warm this year because of El Niño.

From late February until April, I am tired of the cold weather. So, what? I can suck it up for a couple months, if it means I can live with my wife and see my son every week or two. And if I can afford to retire, can’t I afford a week or two in Florida?

What about taxes? This is even simpler. Minnesota has a top income tax bracket of 9.85%. Since the increase in tax is gradual, if you make $100,000, you will pay $4450.

Patients of mine who spend a lot of money tell me that you need more than $100,000 per month to retire. Let’s set that question aside because everyone has different needs. But you don’t pay taxes on what you spend, only on income. If you spend savings that aren’t in a retirement fund like a 401k, then you aren’t taxed on most of it–you are only taxed on capital gains and income from investments, which are likely less than $100,000. So your state income taxes are likely less than $4450. If you are earning more than $100,000 from investments, then you have enough money not to worry about $4450 or even $10000 in state income tax.

Another point about state income taxes is more important. Let’s say I move to Florida to save even ten thousand dollars in taxes per year. Our son still lives in Minnesota, so we will want to see him. Three trips to Minnesota would cost at least $10000. He could visit me, but do I want him to spend the money and give up his vacation time to visit me so I can save a few bucks?

I don’t see the reason to move when you retire unless you don’t have anything or anyone important enough to keep you where you are. And if that is the case, leave now, before you retire. Life is unpredictable. If possible, be where you want to be right now. Live the best life you can right now. If you are fortunate enough to have people in your life you care about, be near them right now.