5 Surprise Costs to Expect When Relocating in Retirement

When talking about relocating in retirement, the focus tends to stay on the positives -- better weather, how much you could save, and what kinds of new activities you'll have available to you. Those upsides can absolutely be true, but they don't tell the full story of what it's like to relocate in retirement.

Relocating can also bring new costs that could upend your retirement budget if you're not careful. Here are five expenses worth preparing for before you make your move.

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1. New taxes

If you're moving to another state or country, you could find yourself facing taxes you've never owed before. For example, if you live in a state that doesn't charge income tax and move to one that does, your annual expenses will change. If you move to a state with Social Security benefit taxes, you may have to get used to losing some of your checks to your state government.

Make sure you understand which new taxes you could face in your new retirement city, so you can budget accordingly. If necessary, consult an accountant in your retirement destination to get a sense of how much you could owe.

2. Travel expenses

If you move far from friends and relatives, you'll likely want to return home to visit them during your retirement. This can get expensive quickly, especially if you have to fly there.

You can budget for this by estimating how often you'll return home and how much a return trip will cost using today's prices as a baseline. But keep in mind that travel costs could rise in the future. You may want to include a little cushion in case transportation expenses rise faster than expected.

3. More costly Medicare Advantage plans

Moving to another locale can force you to switch Medicare Advantage plans. You may not always pay more. It depends on where you start from and where you move to. But it's definitely possible that you could owe more than you did in years past.

Prepare for this by comparing Medicare Advantage plans available in the area you plan to retire in, so you know what options you have. Moving should qualify you for a Special Enrollment Period, which lets you change your plan outside the standard Open Enrollment Period.

4. Higher insurance premiums

Moving to an area with a higher cost of living or a greater risk of insurance claims could increase your retirement costs. For example, if your new home is more expensive than your old one, your homeowners' insurance premiums will likely be higher than what you're used to paying. This is especially true if you move to an area at high risk of natural disasters.

Shopping around and comparing rates from multiple insurers is the best way to find a good deal. You may also want to save a little more in your retirement accounts for future home insurance premiums.

5. New lifestyle expenses

Moving to a new area can bring you closer to your favorite hobbies, but that can also lead to new costs. For example, if you're someone who enjoys fishing and you plan to retire on a lake or near an ocean, you might decide you want a boat in retirement. But that means you'll have to pay for the boat itself, gas, maintenance, boat insurance, and possibly storage in the winter.

Think about how you plan to spend your retirement, and which activities might bring costs of their own. Make sure you include these when building your retirement budget.

If you forgot to include any of the above expenses in your retirement plan, it's not too late to fix it. You may need to increase your savings rate or delay retirement a bit to give yourself more time to save. That might not be ideal, but it's better than draining your nest egg too quickly.

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