Where will you live after retirement and why will you live there?
Most of us would like more money to spend. Some people look around and see others with more money or resources or a better living situation and some see their situation as a result of "unfairness" or social injustice. Some people are natural pessimists; others are naturally more optimistic. A pessimist sees the downside of most situations.
The tendency apparently doesn’t usually change after retirement.
We occasionally get email from readers that goes something like this: "I live in the major metropolitan area where I used to work for the federal government. I get the same annual increase as those that are living in lower cost areas despite the higher cost of living and it is hard to make ends meet as everything is more expensive here. Is there any legislation pending to correct this problem?"
In other words, if you live in a large metropolitan area like Washington, DC, New York City or San Francisco, it will cost you more to live there than if you live in many other parts of the United States.
While it is true that your retirement income will generally not increase more for federal retirees living in a city like Washington, DC than less expensive areas, here is a more optimistic view. First, you may already be getting more than someone who worked in another, less expensive location. Grades are often higher in an area like Washington and the federal locality pay system ensures that people in these areas generally get more money while still working. These factors translate into higher income in retirement.
Second, you can move when you retire. The government will send you a check wherever you live. Taxes may be lower, housing may be lower and food costs are often lower in rural areas. So, if your income is a major problem, moving may be an option. Your expenses will go down and your income will still be higher than for many other retirees.
Occasionally, other factors pop up that may influence your decision–some of them are unique.
For example, if you happen to be Jewish, you may get an extra $50,000 to move to Dothan, Alabama. A man named Larry Blumberg has advertised in Boston, Miami and Washington to attract fellow Jews to Dothan, an overwhelmingly Christian town of 58,000. He wants to revive the Jewish community in Dothan as it is getting smaller in this southern Alabama town.
Regardless of your religious preference, your money will go a lot further in Dothan than in the DC area. For the sake of comparison, an income of about $63,239 is equivalent to $100,000 in the Washington area.
I have been to Dothan a few times and lived and worked in the Washington area for a number of years. The cultural atmosphere is certainly different in a small city of 58,000 or so but there is generally less stress, getting around is easier and choosing a restaurant or movie to attend is often easier just because there are fewer choices.
But, if living in a rural area is not compatible with your preferred living but you still want to stretch your income, perhaps you should consider living in a college community.
Many retirees want to expand their intellectual horizons and returning to a college town may rejuvenate your intellectual curiosity–not to mention that the average age and energy level will be much different in a college town than a retirement community.
For example, Fayetteville, Arkansas is near the Ozark mountains and home to the University of Arkansas. If you are over 60, you can study free at the University. Your hypothetical salary of $100,000 in the Washington, DC area will stay the same if you are a federal retiree and about $62,918 will buy you the same as $100,000 in DC.
Or how about Charlottesville, VA? It is within an easy drive from the Washington area and $100,000 in DC is roughly the same as $75,317 in Charlottesville. It is the home to the University of Virginia and students over 60 who have lived in the state for a year can audit courses at no cost.
Or perhaps you were a hippie in the 1960’s in college and want to relive the experience. If so, perhaps you would like to live near the University of Colorado in Boulder. Your hypothetical $100,000 in DC will go further in Boulder (not too many miles from Denver by the way) as you will only need $79,634 in Boulder to equal your $100,000 in the Washington area. There is a lot of open area near Boulder, the mountains are not to far away and there are a large number of used bookstores–not to mention an atmosphere that seems to scream "liberal counterculture" while walking along the streets of the town.
So, to take a more optimistic view of retirement than some of our readers occasionally display, you have numerous options when you retire. You do not get an annual locality pay differential when you retire, as you may have gotten as an active federal employee, but you also have more options.