Should Arizona Be on Your Retirement Shortlist?

For some, the choice of where to retire has never been in question: They love where they live and they want to stay close to home and their family and friends. But for others -- maybe including you -- the choice isn't as clear cut.

You may have dreamed about retiring in a new place where you might be able to enjoy nicer weather or try new activities. Arizona is a popular choice thanks to its mild winters and dry heat, which some find more bearable than the humidity of other popular retirement destinations like Florida. But there are also other factors you have to weigh before deciding whether Arizona is the right choice for you.

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Cost of living

Arizona's overall cost of living is a little above average compared to the rest of the U.S., according to data from the Missouri Economic Research and Information Center (MERIC). This is in large part due to its above-average housing costs. This could be a barrier, depending on where you hope to live in the state. Large cities, like Phoenix and Scottsdale, tend to be more expensive. But as in all states, if you're willing to step outside the cities, you can often find more affordable housing.

Other common costs, like groceries, utilities, healthcare, and transportation fall pretty close to the national average. Again, this varies by location.

When looking at cost of living, you also have to consider where you're coming from. If you're moving from an expensive city like New York or Los Angeles, then you could see your monthly expenses decrease in Arizona. But if you're coming from a small town in the Midwest, you're more likely to experience sticker shock.

Taxes

Arizona doesn't have a state Social Security tax or an inheritance tax. Its state income tax is also pretty low at just 2.5%.

Where things get a bit more complicated is sales tax. The state sales tax is 5.6% and the average state and local sales tax is 8.38%. This is high compared to many other parts of the country. However, some items, like prescription medications and groceries, are not subject to sales tax. And if the city you move to has low or no local taxes, sales tax might not worry you as much.

Keep in mind you'll also owe federal income taxes, and you could owe federal Social Security benefit taxes as well. You may want to consult an accountant operating in Arizona if you're unsure how a move might affect your tax bill.

Lifestyle fit

Arizona is home to many thriving retirement communities and boasts plenty of activities, especially for those who like getting outside. If you enjoy hiking, golfing, biking, or camping, you'll find plenty to do here. The large retirement population also means it isn't too difficult to find other retirees to socialize with.

But only you can know whether it fits with your lifestyle. If it would take you too far from family and friends, you may want to cross it off your list. Or if you enjoy all four seasons, you might want to look for a retirement home with a different climate.

If you think Arizona could be a good choice for you, it's best to give it a test run before you actually retire there. Take an extended vacation to the area where you hope to retire. Check out its amenities and activities and pay attention to how the costs stack up to what you're used to. You may want to do this a few times before you retire so you can be sure it's the right fit.

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