Retirement living! For many people, the ideal retirement destination is identified by answering this question: "If you could live anywhere you wanted, where would you live?" It's a romanticized way of looking at retirement, and it can be a perfect method for some people, but a poor or impractical method for others.
Start With the Possible
Living in a mansion in the Greek isles may sound like a wonderful way to retire; after all, you loved your vacation in Greece. Then again, if you can't afford the mansion, much less its maintenance and upkeep, this permanent vacation wish isn't going to come true. Besides, do you really want it to? (Find out what information you need to guide your planning and achieve your goals in Five Retirement Questions Everyone Must Answer.)
Visions of retirement as a permanent vacation are probably unrealistic. When you go on vacation, you tend to live in a different manner than normal. Maybe you order every meal from room service or eat out every night; perhaps you spend most of your time at amusement parks or skiing. It's a great way to spend a week, but do you really want to lie on the beach or ski or ride roller coasters for the next 20 years? Even if the answer is yes, can you afford to?
Unless you are extraordinarily wealthy - and we're talking about a lot more than $1 million - money is likely to be the biggest factor in choosing your retirement destination. With this in mind, it makes sense to start with dollars and cents when defining your retirement vision. (To learn more about financing your retirement, see Retirement Savings Tips For 55- To 64-Year-Olds.)
The first question to answer is, "Do I need, or want, to work during retirement?" If you are taking full retirement, with a complete end to your working years, you will have greater freedom to choose a retirement destination. If you are going to work, you will need to determine whether your ideal destination has jobs for people like you. This not only applies if you plan to remain engaged in your primary profession, but also if you plan to leave your primary profession and work a part-time job for insurance benefits or spending money.
If you speak English and want to work in a part-time job, you can probably find one in the United States or Canada, but you probably won't be able to make money on the beach in Greece. Don't forget to consider the language and cultural barriers overseas. Compare these obstacles against the financial benefits, your personality and your willingness to adapt. (Read Life After Retirement for some personal finance tips for those who have already retired.)
If you're not planning to work, can you afford to continue to live in your desired manner? How about if the bottom drops out of the stock market, the real estate market, the Beanie Baby market, or wherever else your cash is stashed? If you don't know, you'll need to figure it out before you quit your job and move to paradise.
Start with a budget: where is your money coming from and can you count on it to continue and to keep pace with inflation? You should also consider the cost of moving and real estate. A small house in Iowa may be quite affordable while a villa in Switzerland may not be an option. Even if you choose to stay in your home country or even your hometown, you should carefully consider income taxes and real estate taxes. The tax rates from state to state, and even from town to town, can vary widely. You may be able to afford the house, but over the long term, the taxes may be too much to bear. Similarly, the personal income tax rate varies dramatically from area to area. Consider, for example, that many sports stars and lottery winners choose Florida as their primary residences due to the lack of personal income tax. (Learn some sensible strategies for sustaining your hard-earned savings in Managing Income During Retirement.)
Unless you are fortunate enough to retire quite young, healthcare costs and access to care are likely to be major considerations. If you have heart problems, you won't want to live far from a hospital with a good cardiac unit. If you have little in the way of financial resources, you may want to choose a state that offers high-quality, affordable healthcare assistance for low-income senior citizens.
Likewise, if you retire at 50, will your destination of choice still work for you at 60, 75, 85? You may like to ski today, but what about when you need to give up your car and use public transportation? Is affordable transit available? Don't forget to factor in safety, as low-crime areas are generally best for the elderly.
Refine Your Search to the Probable
After looking at financial and other factors, you've narrowed the list to a variety of destinations. Now it's time to narrow that list further. Start by writing down all of the items and amenities that you simply can't live without. List them all, from access to a part-time job in a coffeehouse to a nearby diabetes specialist, a good medical center, a large university library, low real estate costs, or having snow in winter. List every aspect of your daily life that you might live without when you go on vacation, but wouldn't want to skip during your golden years. Put these items in order from most to least important.
Now compare the list of possible destinations to the list of amenities. If sand under your feet wasn't on that second list, the a Greek island may be out of the picture. On the other hand, if skiing made the list, perhaps that place in the mountains is a real possibility.
Test the Reality
Once you know what you can afford and where you might like to live, it's time to test the waters. Moving is an expensive and disruptive process, so before you make the commitment you'll want to be sure about your choice. Whether your dream is a house at the beach or a house on wheels, consider renting before you buy. Either rent for a year or make multiple visits so that you can experience the weather during all seasons. The weather changes dramatically in many places, so be sure you like it year-round.
When you are sure the area is right for you, make the move. All of the planning will pay off, and you will be much happier having done the homework in order to make the right choice. Based on your finances, it may not be possible to live anywhere in the world, but with careful research, you can find a place that will work for you.(Where you are going to retire is just one of the many things you need to plan. To learn more on both the personal and financial perspective, be sure to check out our Retirement Planning Tutorial.)