One of the biggest decisions you’ll make when you prepare to retire is where to live. Will you stay where you are or relocate? Many retirees move to be closer to their children and grandchildren, while others move to warmer climates. The so-called “snowbirds” move from the colder Northern states to warmer Southern states each winter, and then when spring comes and the snow is gone, they head back to their original homes for the summer.
“Snowbirding” isn’t new; it’s a century-old tradition that was first used in 1923 to describe workers moving south for winter gigs. In the winter of 2023–24, 34 percent of Americans had plans to snowbird to various parts of the world, with 38 percent heading south, according to one survey.
Many retirees would prefer to lounge on the beach, go boating and enjoy other outdoor activities during the winter months than to shovel show and hunker down for the winter inside their homes.
While we typically think of snowbirds as being older people, the gig economy has resulted in more Southern migration by younger people. These younger snowbirds aren’t looking for the gated communities and golf courses their older counterparts often seek out; many of them are looking for outdoor adventures, a bustling night life and great dining options.
Here area five tips for preparing for a snowbird lifestyle in retirement.
1. Pick a place that matches your day-to-day lifestyle
Most people have had their dream locations in mind for a long time; however, this isn’t true for everyone. If you’re not sure where to relocate, take some time in the years leading up to your retirement to visit some potential locations where you might snowbird.
You don’t necessarily have to purchase a home in a second location to snowbird; you can rent a place in the warmer climate or even drive your RV to the new locale. Work with your financial advisor to run some different “What if?” scenarios and find out which option makes sense for you financially.
There are both pros and cons to purchasing a second home. The benefits are that you can build equity in both homes simultaneously, you can rent out each home while you’re staying in the other one and you’ll always have access to both homes whenever you want. The downsides include trying to manage maintenance on either home from a distance, being limited to the same destination each year and dealing with the logistics of renting your homes each season.
Also, be sure to spend a little bit of time in a new location before you move there. You might be surprised to hear that we’ve known people who moved to new locations without ever having visited them or after visiting for just a day or two. Vacationing in a place can be quite different from living there. Visit the new location at different times of years. Talk with people who’ve moved there, and find out what they do and do not like about the location.
2. Decide which home will be your primary residence
If you do purchase a second home instead of renting, you will need to decide which home will be your primary residence, or “domicile,” for tax and legal purposes.
For example, you will need to create a will in the county of your primary residence.
Most states consider you a full-time resident if you’re there for 183 days or more during the taxable year. Even if you’re retired, you may need to file a tax return in your state of residency to report any investment income, Social Security income and other income, depending on the requirements and thresholds in your state.
According to the IRS, you can have only one primary residence at a time. If you own or live in more than one home, you have to apply a “facts and circumstances” test to determine which property is your main home. The most important factor is where you spend the most time, but there are other factors as well, including your U.S. Postal Service address and the address on your voter registration card, your federal and state tax returns, your driver’s license and your car registration.
3. Be aware of tax implications
As with any major financial move you make, advance planning can help you avoid tax mistakes. Again, work with your advisor to optimize your outcome.
For example, the trend of changing domicile from a high-tax state to one with no state income tax has been accelerated by the $10,000 limit placed on the state and local tax deduction for federal income tax purposes.
Consider sales taxes and property taxes as well. Domicile rules can vary by state, so be sure to seek out legal counsel in both states, to avoid tax surprises.
4. Make sure you have good medical care in both locations
It’s important to make sure you have the best possible medical care in both locations — and also to make sure there is seamless coordination of care among the health-care providers in both locations. This is especially critical if you have a medical condition that requires ongoing attention.
If you are 65 and older and enrolled in original Medicare, you will be covered in any state. This is good news; it means you are free to travel wherever you want. If you are not 65 yet or you have commercial health insurance, find out the terms of your coverage for traveling. Find out in advance how your medical insurance works and what types of costs you might incur while you’re snowbirding.
5. Make arrangements for your “non-season” home
If you are renting out one home while living in the other one, then you probably have most of your ongoing maintenance taken care of on a regular basis. If you’re not renting out either home, you’ll need to arrange to have someone take care of certain tasks such as bringing in and forwarding mail to you, watering plants inside and outside the home and watering the lawn if you do not have an automatic sprinkler system.
You can easily hire a house sitter or a management company to handle these details for you. If you are lucky enough to have really nice and accommodating neighbors, you could ask them to handle these tasks. Maybe you could do the same for them, in return.
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The earlier you plan for the financial aspects of retirement, the better. The same is true of the logistical aspects of retirement. We will be happy to guide you in figuring out the costs, tax implications and other important realities of snowbirding and potentially owning homes in two different states.
Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
