The Call of the Snowbird Life
Ever think of moving to a warmer climate for the rainy/snowy season? At one time or another, all of us who live in northern climes have thought how nice that would be. As with most retirement options, the further ahead you plan, the more choices you will have. If you’re retiring soon and want to try the snowbird lifestyle, you should do some planning in advance. That includes reviewing your sources of income: Social Security; pension; withdrawals from your 401(k), IRA, and/or other retirement accounts. Armed with that information, determine a budget and cost-of-living expenses—for maintaining your current home, as well as the additional cost of going south for several months.
Here are some of the additional questions to consider:
Do you have an area in mind?
Unless you’ve already spent extensive amounts of time, and keep going back year after year, we don’t recommend buying a home or condo yet. Instead, rent a place in the area you think you want to winter, and do it for the full winter for a year or two. If you don’t still love it, spend a couple years testing out different areas. Doing this will help you decide if you really like an area (and if you like being away from your home) for extended periods.
Do you want to buy a home or rent?
Once you have chosen what you think will be the perfect winter home location, you will need to decide if you want to buy or rent. There are three factors to consider when making this decision:
- Opportunity Cost – Even if you have cash to purchase a home outright, consider the opportunity costs. For example, if you purchase a winter home for $300,000, you’ve tied up that much capital that could have been earning you a return if it was invested. At 5% that money could have been earning $15,000 per year. Could you rent a similar house for that same $15,000 per year and keep your money invested?
- Maintenance – If you own a winter home you will need to maintain it—even when you’re not there—so be sure to add those costs into your calculations.
- Flexibility – Many retirees find that they prefer to rent so they don’t feel obligated to go the same place every year. Other people feel more comfortable in a home they own. There isn’t a wrong answer; just make sure you think it through.
Apartment, house or trailer? In/near a city, or more rural?
As is mentioned above, when deciding what kind of home do you want to live in, consider the maintenance it will require. A condo might be a better option if you don’t want to worry about landscaping and lawn care when you’re not there. A single-family home, on the other hand, requires additional maintenance, as well as the need to have someone check on the place periodically. The last thing you want is to come back to a water leak that has caused catastrophic damage or find that rodents have made themselves at home. You can now buy electronic sensors that connect via wifi and will notify you if there are problems, but it still requires more attention than a condo.
Taking time to consider such issues, and design a plan that works for you, will help you to decide the best option for you.
Once you are ready to head south to warmer weather, don’t forget to do some things in your northern home:
- Tell your neighbors and family you’re leaving, and how to contact you;
- Make sure your home is looked after and protected (a security system is an excellent idea)
- Touch base with your doctor and other healthcare professionals. Verify that doctors in the new area will accept your insurance.
- Notify your bank, and arrange for utilities and other bills to be paid automatically.
It’s also a good idea to meet with your Financial Advisor before you head south, even if you follow your accounts online or will only be gone for a few months; make sure you know how to reach each other in case you may need to make changes while you’re gone. Your advisor can also review your financial assumptions to make sure that you’ll remain financially secure sharing living between both locations.
Life as a snowbird can be more than just a dream or wish. With a little planning, you can make it part of your ongoing lifestyle.
Viridian is an SEC Registered Investment Advisor (RIA) with clients across the United States. Viridian offers financial planning, investment management, and tax services (through its sister company, Viridian Tax and Accounting). This article was co-written with Shannon McCarty, Viridian’s Director of Marketing.