Personal Finance

3 Decisions You Must Make Before You Retire | Personal-finance

You’ll have to think about your likely longevity, and how much risk you’re willing to take of running out of money, when you decide on a withdrawal strategy that works for you. It’s best to make this decision early, as this can help you estimate the account balance you’ll need.

2. Where you’ll spend your retirement

Your chosen retirement destination will have a huge effect on your finances for a few key reasons:

  • Cost of living varies across the United States, and even in different parts of each state
  • Tax rules differ across states, with some states taxing Social Security benefits, and others charging no income tax at all
  • Some places are more walkable than others, allowing retirees to forgo the expenses associated with vehicle ownership
  • The type of house or apartment you live in can affect your costs

If you plan to live in an expensive city or want to continue to reside in your expensive family home in the suburbs where you’re car dependent, you’ll need much more money to retire comfortably than if you opt for life in a cheap area with low taxes that’s walkable.

Of course, your decision about where you live has huge implications for your quality of life. You may want to stay near family or friends or live someplace that’s a cultural mecca — even if that means you’ll need a larger nest egg. You’ll need to know this when making retirement plans so you can base your financial goals on the costs you’ll incur in your preferred destination.

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