Moving to a state with no income tax on retirement withdrawals sounds like a guaranteed financial win, and the lifestyle change feels well deserved. But hidden expenses can turn a dream move into a financial nightmare that slowly chips away at the savings you worked so hard to build over your career.
Costs like insurance, utilities, and taxes vary widely and may offset savings from cheaper housing or consumer goods, Tyler Abney, a managing partner at Tidemark Financial Partners in San Diego, told AARP. Those ongoing costs can strain your savings in ways that most retirees never see coming before the moving truck arrives.
Six retirement relocation costs that financial planners say clients never see coming
Financial planners who specialize in retirement transitions say the same handful of expenses blindside their clients year after year. The costs below represent the gap between what relocating retirees project on a spreadsheet and what they actually pay once they settle into a new state, according to AARP.
1. Health care access and Medicare coverage
Moving out of state often means starting over with new doctors and specialists, leaving behind a health care system you relied on for years. This transition can be especially difficult if you are enrolled in a Medicare Advantage plan, because these plans are regional and may not be available in your new location at all.
One of Abney’s clients moved from Pennsylvania to North Carolina and had to switch to a new plan with $2,500 more in annual out-of-pocket costs due to network limitations alone.
Prescription drug costs can also shift dramatically, with a brand-name medication jumping from a $45 copay on Tier 2 to a $95 copay on Tier 3 in the new area’s formulary, Jeremy Clerc, CEO of Assisted Living Magazine, an online marketplace for retirement and long-term care communities, explained.
Before you move, compare out-of-pocket costs, provider networks, and drug coverage in your new area to avoid a health care cost shock, Abney recommended.
2. State tax savings
Moving to a state with no income tax sounds like a guaranteed financial win, but the full tax picture is rarely that straightforward for relocating retirees. Property taxes in popular retirement destinations such as Texas and Florida can run significantly higher than in other states, potentially canceling out income tax savings entirely, Abney noted.
The local sales taxes might also be higher in your new state, and many retirees are surprised by the increased sales tax on everyday items, Stephanie Sherman, a financial planner with Prudential based in West Palm Beach, Florida, noted.
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Some retirement payments even get taxed by your old state, including deferred compensation paid over fewer than 10 years, which remains taxable where the income was originally earned, Sherman confirmed.
Abney recalled a client who relocated to Florida to avoid income tax, only to find that homeowners’ insurance there costs nearly triple, and rising property values drove up the real estate tax bill. The lesson is to calculate total after-tax living costs rather than focusing solely on the income tax rate you leave behind.
3. Insurance premiums
What you pay for home and auto insurance depends heavily on your zip code, and storm-prone coastal areas present the biggest financial surprise for relocating retirees. Sherman said her clients get the biggest sticker shock when they move to coastal areas and confront homeowners’ insurance premiums two to four times higher than what they paid before.
Tropical storms and hurricanes have caused Florida home insurance prices to skyrocket, with some insurers abandoning the state altogether
In Oregon, you probably won’t pay for hurricane insurance, but you might if you move to Florida, Annie Cole, founder of the financial education site Money Essentials for Women, explained. The same goes for car insurance; if you live somewhere with higher crime or auto accident rates, you will likely pay a significantly higher premium on your vehicle coverage, she noted in the AARP article.
4. Retirement community entrance fees
Many retirees planning to enter an older-adult community assume their monthly costs will be a straightforward rent payment, with no large upfront charges or escalating fees. “So many retirees who come to us have a false understanding that communities operate strictly on a monthly rent basis,” Clerc noted in the AARP report.
Continuing care retirement communities charge entrance fees averaging $300,000 to $400,000 before monthly costs even begin, with ancillary charges for meals, housekeeping, or health care escalating as residents need more care.
Clerc recommended keeping at least two to three years’ worth of community fees accessible after paying the entrance fee, to avoid financial entrapment.
5. Home maintenance costs
Home maintenance costs fluctuate by state because labor rates for skilled trades have climbed due to higher inflation in recent years, Mitchell McNeil, a wealth management adviser at Northwestern Mutual in Minneapolis, noted.
As retirees age, many need to hire help for tasks they once handled themselves, from lawn care and home repairs to routine handyman work, which makes local labor costs a critical factor when choosing a destination, AARP reported. Cole recommended setting aside 1% to 4% of a home’s total value each year specifically for maintenance expenses rather than hoping to cover costs as they arise.
6. Utility bills
Utility bills can add thousands to annual costs depending on where you settle after retirement. Electricity in California costs 27.04 cents per kilowatt-hour, compared to 10.6 cents in Idaho, a gap that translates into significant annual savings or losses depending on your destination,according to the U.S. Energy Information Administration’s most recent State Electricity Profile.
Water bills show similar disparities; an analysis by moving services marketplace Move.org found that West Virginians paid $122 monthly for water in 2024, compared to the national average of $47, AARP noted.
Careful preparation protects retirees from costly relocation surprises
Rushing into a new mortgage presents a significant risk for retirees in their 60s and 70s who may be taking on decades of housing debt on a fixed income. “We see too many clients who decide to finance some of the cost on a mortgage,” McNeil cautioned, adding that with home prices rising and interest rates remaining elevated, renting can be a more practical solution.
Clerc also warned against over-relying on proceeds from selling a former home to fund the entire transition, because clients often plan to use home equity without subtracting the significant costs associated with selling.
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