For many, being retired conjures an image of a carefree beach-bum existence. But, unfortunately, the reality of retirement doesn't mean an end to expenses or responsibilities, and there are many factors to consider if you wish to enjoy and maintain a certain quality of life. Here are five of the top factors to consider when determining where decide to spend your golden years. (For more, see Choosing The Right Retirement Destination.)

Tutorial: Retirement Planning Basics

1. Taxes
As the saying goes, the only certainty in life is death and taxes, and, unfortunately, they don't disappear just because you've retired. Here are some of the key tax implications to consider.

General State Taxes
A common error when calculating retirement destination taxes is considering state income tax alone. While a tax-free state sounds appealing on paper, remember that these states must find a way to make up for the lost revenue. Often, it comes in the form of higher sales and property taxes. You will pay sales tax in all states except Alaska, Delaware, Montana, New Hampshire and Oregon. Of the states that charge sales tax, California has the highest rate of 8.25%. Indiana, Mississippi, New Jersey, Rhode Island and Tennessee tie for second with a sales tax rate of 7%. The states with the lowest state and local taxes as a percent of income are Alaska, Wyoming, Vermont, North Dakota and Hawaii. (To learn more, see "Temporary" Taxes That Stuck.)

Personal Income Tax
Even as a retiree, you will pay personal income tax in all states but Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

Federal Income Tax
If you live in Alabama, Iowa, Louisiana, Missouri, Montana, North Dakota, Oklahoma, Oregon and Utah, you'll enjoy some benefits as a retiree. These states all allow residents to deduct some or all of their federal income taxes.

Retirement Income Tax
Many states do allow retirees tax benefits by excluding tax on Social Security retirement benefits from state income taxes. The District of Columbia and 27 other states provide a full exclusion for these benefits (Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin).

IN PICTURES: 10 Last-Minute Retirement Tips

2. Climate
Particularly for those retiring from a colder climate, warm weather may top your list of criteria when defining the perfect retirement destination. If you're seeking solace from harsh winters, consider locations in Hawaii (Oahu), Florida (Key West, Boca Raton, Naples, Winter Haven, Sarasota), Texas (Galveston), or California (Newport Beach, Palm Springs), all noted for some of the average warmest January climates.

3. Work Opportunities & Recreation
Just because you're retired from the daily work grind doesn't necessarily mean you don't want to stay active in the workforce (albeit, a little less active). AARP researched some of the best flexible and lucrative job options for retirees. Among their noted professions are limo drivers, which can be in great demand in areas that draw special events like weddings and corporate conferences. Tutoring services can be another great side-job if you retire in an area where there are many children of dual-income families. National Park Service retiree employees can enjoy the great outdoors while earning anywhere from $14 to $18 an hour, according to the U.S. Dept of Labor. (For more, see 8 Popular Post-Retirement Jobs.)

To that end, where to play is also a key consideration in retirement. States with largest number of national parks, historical sites, military parks, campgrounds, and state parks within a 100-mile driving radius include Maryland, Pennsylvania, California, Utah and Nevada.

4. Cost of Living
If you're less concerned with proximity to family or friends and more interested in climate and low costs of living, a new retirement trend involves living abroad. The U.S. State Department estimates that there are currently about 1.5 million retirees living abroad. Popular destinations include Mexico and Belize, where there is no tax on the first $75,000 of annual income and property taxes average around $90 a year for a half-million dollar home.

5. Housing Market
If you plan on keeping your current property or buying a new home to continue maintaining and building wealth, the health of the housing market where you retire is a huge consideration (in addition to the taxes you'll pay for home ownership). According to CNNMoney, there are a few markets poised for comeback in 2012. Among them: Tacoma, Palm Bay, Memphis, Rochester, Pittsburgh and Charlotte. (To learn more, see 8 Signs Your Neighborhood Is On The Upswing.)

The Bottom Line
Deciding where, when and how to retire is a unique and personal decision that involves a variety of factors. By carefully considering the myriad of financial and lifestyle considerations that go into your retirement strategy, you can ensure a smooth, rewarding and happy transition into this new life phase. (After all, you've earned it!) (For more, see Finding A Retirement-Friendly State.)

Related Articles
  1. Savings

    What Your Credit Score Means for Your Love Life

    Wondering if your significant other wants to commit and is reliable? The Fed might have the answer.
  2. Retirement

    Should You Retire in Greece This Year?

    The Greek financial crisis has left the nation in a vulnerable economic state. Does that make it a good place for expat retirees or the opposite?
  3. Retirement

    Early Out: A Realistic Plan to Retire Younger

    If you want to retire ahead of schedule, it'll take some extra planning.
  4. Retirement

    6 Robo-Advisors That Require Little to Start

    There are many well-regarded robo-advisor options that come with minimum investment amounts. Here are snapshots of a handful of them.
  5. Retirement

    5 Reasons Americans Retire Abroad

    From better weather to a cheaper cost of living, here are 5 reasons to make the move.
  6. Retirement

    Smart Ways to Tap Your Retirement Portfolio

    A rundown of strategies, from what to liquidate first to how much to withdraw, along with their tax consquences.
  7. Saving and Spending

    Social Security: Navigating it with Your Clients

    Many people don’t realize how confusing Social Security can be until they're face to face with taking it. Here's how to talk to clients about it.
  8. Your Clients

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  9. Retirement

    Is it Safe for Retirees to Invest in Technology?

    Tech stocks are volatile creatures, but there are ways even risk-adverse retirees can reap rewards from them. Here are some strategies.
  10. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
RELATED FAQS
  1. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  2. What is the maximum I can receive from my Social Security retirement benefit?

    The maximum monthly Social Security benefit payment for a person retiring in 2016 at full retirement age is $2,639. However, ... Read Full Answer >>
  3. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  4. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
  5. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
  6. Is Russia a developed country?

    Though it once reigned alongside the United States as a world superpower, Russia is not classified as a developed country ... Read Full Answer >>
Trading Center