Question: My wife and I are both 68 and have always dreamed of living in Florida near the coast. We finally did it when we retired about a year-and-a-half ago. We sold our house in Albany, New York, and headed for Boca Raton, Florida.
Besides the coastal life, we were drawn to Florida because there is no state income tax. I have a large 401(k) balance and don’t want to worry about paying taxes on withdrawals.
We spent $1.5 million on a two-bedroom condo overlooking the ocean, which is a three-minute walk to the beach. It was paradise, until it wasn’t. After about 18 months, we hate it here. The weather is too extreme, the area is too crowded, and I’m worried about hurricanes. We don’t want to stay, but we don’t want to go back home or anywhere cold either. What should we do?
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Answer: Life can be funny that way. You dream about something for years, only to discover it’s not what you expected. You already know the answer to the first part of your question. If you absolutely hate it and don’t want to stay, you have no choice but to move. Life is short; you don’t want to waste time being unhappy, but you also don’t want to throw money away.
That’s why Nell Cordick, a financial advisor at Bogart Wealth, says you need to stick it out in Boca Raton for at least six more months, until you hit the two-year mark as a homeowner.
If you sell your home after living there for two years, up to $250,000 for individuals and $500,000 for couples in gains is exempt. “At least stay and get the exemption,” if you can sell your house for a profit, says Cordick.
You’ll likely incur fees and expenses selling your condo, but they can be offset if you can sell it for a profit. If not, chalk it up to the cost of your happiness. The additional costs could mean some sacrifices when selecting your new location, but that may be a price well worth it.
You could use the condo as a rental property, some or all of the year. Just make sure you’re up to the challenge of everything that comes with being a landlord, especially a long-distance one.
Is a half-back relocation right for you?
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The second part of your question is trickier because it’s a uniquely personal decision, but in your case, in which it seems taxes and weather are top priorities, you may benefit from a so-called ‘half-back’ relocation.
Moving halfway back is a growing trend among retirees who regret their migration down south to Arizona and Florida. Instead of moving back to their home states, they settle somewhere in between their original location and the place they retired to, such as the Carolinas, Tennessee, Georgia and Virginia. While they aren’t exactly halfway home, they are in a location that may represent a happy medium, offering some of the benefits of the initial retirement destination, such as milder weather, without as many negatives, such as overcrowding and sky-high prices.
If you decide to move to one of the so-called half-back states or anywhere else, be aware that the tax breaks may not be as generous as those in places such as Florida. Of the half-back states, only Tennessee doesn’t have state income tax. But that doesn’t mean the other states shouldn’t be on an aspiring half-back’s list. The cost of living could be less in one of the other states, despite having state income tax, making it a worthwhile move.
But weather and climate aren’t the only points to focus on if you’re moving half back. You also want to consider what the new location offers in terms of community services, places of worship, restaurants, entertainment, access to doctors, hospitals and airports. Think about everything that matters to you in your current location before you make your next move.
“You made the first mistake moving to Boca, you don’t want to make the second mistake jumping the gun when you move,” says Owen Malcolm, managing director of Apollon Wealth Management. “Don’t pick up and move somewhere else without kicking the tires.”
Give your half-back location a test run
Renting an apartment or Airbnb before you buy your next home can be a good way to make sure you’re happy in the new location. It will give you time to make sure the new place has all the amenities you need and the solace you may crave. If renting is out of the question, try to visit the place as often as you can before deciding whether you want to move. Visit during peak and off-peak times to get a feel for it.
“They need to understand what the different neighborhoods are, the different traffic patterns, different times of tourist seasons,” says Cordick. Also, “What type of amenities as a retiree might you be looking for?”
And don’t beat yourself up about making a mistake the first go around. You aren’t alone. Cordick has many clients who moved to a new location in retirement, only to sell a short time after. They weren’t willing to suffer in silence, nor should you.
The good news is you don’t have to. This time, you know what you don’t want, which can help narrow your search.