5 Things To Consider When Choosing Where To Retire
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.)

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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).

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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.)




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