To Snow Bird or Not to Snow Bird?
With the cold of winter, many people are thinking about SnowBirding in their retirement. What is SnowBirding? It’s migrating south for the cold winter months and then returning to the north for the remainder of the year. If you want to Snowbird in the future, it’s best to start planning now.
One of the first questions to ask is where do you want to go? To Florida for the warmth? To Arizona for the dry climate? To the islands for the island lifestyle? What portion of the year are you planning to spend there? Are you looking for a more tax friendly state? You will need to consult your tax advisor for the tax consequences and the amount of time that you need to spend in a state to claim residence. I recommend that people take exploratory trips and rent for at least a year before deciding to purchase. Neighborhoods vary and people need to find the right mix. Are you a social person? You don’t want to wind up in the wrong neighborhood or vice-versa. I have had clients find their ideal dwelling only to move two years later because the neighborhood they chose was not the right fit. At six percent real estate commissions, that can be a very expensive mistake.
Speaking of renting, should you buy or rent for the long haul? That depends. There are of course potential tax benefits to buying, but you really should check with your tax advisor for their impact on your personal situation. Many people want to own their own place and not share the space with others. This also necessitates furnishing the home and comes with potential up keep bills. There are condo fees, local taxes, landscaping costs, electric and cable bills- all the expenses that you have for your primary residence if not more. Will you rent out to others when you are not there? Will you buy in a location where this is easily done? What will the community around you be like? Will you want to belong to a club? Do you have a group of friends who may potentially all want to go rent in the same area each year? There are lots of questions to answer before deciding to rent or buy.
Finally, how much can you afford? How much wiggle room is there in your current retirement plan? Is it worth the extra money that you would need to set aside each month to make this goal a reality? Do you have that extra to set aside? Would you be willing to downsize your current home in order to be able to afford two residences?
Like anything in life, if you start now on your plan to snowbird in the future, you have a much better chance of achieving your goal. The key is to start now.
Cecilia Brown is a Registered Representative offering securities and advisory services through Lincoln Financial Securities Corporation, Member SIPC. Branch Office: Clock Tower Place, 1410 Forest Drive, Suite 28, Annapolis, MD 21403. Lincoln Financial Securities and its representatives do not offer tax or legal advice. Individuals should consult their tax or legal professionals regarding their specific circumstances. LFS-3392442-010620