Should I move to a cheaper city in retirement?

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If you’re nearing retirement, you may be contemplating your current living arrangements and whether a more reasonably priced location would be better suited to you in the years after you finish working.

We take a look at some of the reasons moving to a less expensive city, town or suburb might make sense, and other financial and non-financial things you should think about before packing your bags.

Why a cheaper location might make sense

You need to think about funding a longer retirement

People are living longer and as a result require a bigger pool of savings to fund their lifestyle in the years after they finish working. To put it into perspective, the government has projected that in 40 years the number of people aged over 100 will be 300 times what it was in the mid-1970s¹.

You’ve had less time to accumulate super

Because baby boomers only had the benefit of compulsory super toward the end of their working lives, many haven’t had enough time to accumulate enough in super to self-fund their retirement.

The Age Pension alone isn’t enough to live comfortably

September 2016 figures show individuals and couples, around age 65, who are looking to retire today, need an annual budget of $43,372 and $59,619 respectively to fund a comfortable lifestyle. This assumes they own their home outright and are in relatively good health².

By comparison, the maximum annual Age Pension rate for a single and couple is currently $22,804 and $34,382 respectively³, keeping in mind not everyone is eligible for government assistance.

You want to have fun in retirement

Those who want to live a comfortable lifestyle in retirement will spend about 28% of their weekly budget on leisure and recreation⁴, which may be easier to fork out if you’re living in a cheaper area.

Your adult children want financial assistance

Nearly 75% of parents are providing financial support to their adult children earlier in life, with young people looking to the bank of mum and dad for assistance with education, property⁵ and weddings⁶.

Other things to factor in

While more affordable living arrangements might be ideal in retirement, you should also factor in other considerations.

Financial considerations

The first things to assess, if you’re looking to move to a more affordable location, are property and rental prices, and the general cost of living when it comes to food, transportation and health care.

Remember, whether you’re planning to buy a property or rent a place in the area you’re looking to move to, there will also be out-of-pocket expenses to factor in, such as connecting and disconnecting utilities, removalist fees, and stamp duty if you’re planning on purchasing a home.

If you’re selling your existing property, it’s also worth looking into whether the money from the sale could affect any Age Pension entitlements you may receive under the income and assets tests.

Non-financial considerations

To ensure you move somewhere you love, there will be other crucial things to think about, such as:

How far it’s located from your family and friends
Whether you know anyone in the place you’re thinking of moving to
What local amenities are nearby—shops, restaurants, transport, medical facilities
Whether the area is big on community events such as festivals and concerts
What recreation facilities are there—golf course, gym, community pool, sailing club
Whether there are club associations you can join like Leagues and Rotary
What the weather is like and whether it’s going to suit you all year round
How the job market stacks up in case you decide to step back into the workforce
What the crime rate is like.

If you’re not too sure about some of these things, that’s ok. It might be a good prompter to trial the place you’re thinking about moving to before leaving everything behind. You may consider a weekend away, a house swap or if you’re thinking of buying, renting before you put down a deposit.

Need help?

AMP 17 March 2017

Sources:

¹ http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report
² https://www.superannuation.asn.au/resources/retirement-standard
³ https://www.humanservices.gov.au/customer/services/centrelink/age-pension
⁴ http://www.superannuation.asn.au/resources/retirement-standard
⁵ http://us9.campaign-archive2.com/?u=cc5e9bce699fa1d71a67cf499&id=7a2701cca9&e=a8977ca51d
⁶ https://www.moneysmart.gov.au/managing-your-money/budgeting/simple-ways-to-save-money/how-much-can-a-wedding-cost

This article provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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