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What is your ideal retirement location? Do you dream of beaches or of mountains? Of your home state, or exotic international locales? Of urban skylines or of rural landscapes? Do you like snowy winters, hot dry summers, or moderate temperatures year round? Will you pack up and retire far away from where you worked a career and raised a family, or will you stay put — perhaps downsizing — in your current, familiar community?

It should be no secret to regular readers that Caroline and I are wrestling with this question right now. We sold our home about 3 months ago and have been traveling ever since, living on the road, staying in our trusty camper van, in the homes of family and friends, and in short-term rentals.

Our end goal has been to travel through our favorite regions of the country until we found the right place to put down new roots. Now, we’re getting close to making a decision.

In the past few months we’ve spent time in the southeast, the southwest, and the northeast — the three quadrants of the country that we are most likely to call home, by virtue of familiarity and proximity to family. (Pacific northwesters please take no offense: we love that region too, but, given the distance, it’s a more likely destination for travel than relocation.)

Several readers have asked to hear more about the process we are going through to determine where to live. They’re very interested in our personal experiences, and the possible lessons learned for their own retirement.

Since this is primarily a personal finance blog, you might assume that our relocation decision is primarily driven by financial considerations — cost of living, taxes, and so on. But that just isn’t the case. Since early in my career, I’ve unapologetically chosen living locations based on quality of life factors first, then striven to optimize our finances to support that decision. And that’s always worked out well. Fortunately our tastes haven’t required us to live in the most expensive areas of the country!

This time appears to be no different. We are again likely to choose where we want to live based on quality of life and aesthetic factors, then apply ourselves to living there relatively inexpensively. I’ll get into our own personal criteria for making this decision shortly. But first a little history. As I’ve alluded, this is not the first time we’ve been through this exercise….

The Southeast

I was a software engineer and telecommuted for most of my career. This gave us the luxury of choosing our living location. And we exercised that option in a big way at mid-career, a few years after the birth of our son. We decided we would move out of the cold and expensive northeast before he reached school age. Our criteria then were to settle down in a good community for raising kids, with a reasonable cost of living, and moderate winters. Passionate about outdoor sports, we viewed every location candidate through that lens. If a place didn’t have great mountains, climbing, and trail systems, it just didn’t make it onto our “short list.”

On a long cross-country drive the year before we relocated, Caroline pulled an outline map of the United States out of her school supplies and we began color-coding our options. Black meant “definitely not,” gray meant “probably not,” green meant “possible,” and orange meant “very desirable.” As the miles ticked by, we discussed the options in depth. When it was all over there were just three states colored orange: Arizona, Tennessee, and North Carolina.

At that time, we still didn’t envision living in the west, far from most of our family. So, over the next year, we researched the most appealing cities in the eastern states. We made two trips through the southeast. We phoned chambers of commerce, subscribed to local papers, inspected schools, and talked to local businesses.

Ultimately we chose Chattanooga, Tennessee. In retrospect, it was a great move. Chattanooga, which has always been blessed with great natural resources, had just started transforming itself from an old industrial center to the new economy. A privately-funded aquarium on the riverfront kicked off increasing rounds of public and private redevelopment. Always a regional tourist destination, the downtown drew even more visitors, and now permanent residents. In 2010, the city added the fastest fiber-optic Internet in the country: 1 gigabit-per-second speeds are available to every home and business. Volkswagen, then Amazon, located major facilities there. Already in possession of some of the best rock climbing in the country, the area added great whitewater facilities and mountain biking trails. In 2011, online voters overwhelmingly chose Chattanooga in Outside magazine’s poll to determine the nation’s leading outdoors destination.

And Chattanooga remains a great location today for raising a family, or retiring. If you like being outdoors and you’re looking for a warm, economical city in the southeast, you’ll be hard pressed to find a better retirement location. The setting is among the most beautiful in the country, with a beguiling mixture of mountains and water leading to incredible views. The economy is vibrant. Fine arts, entertainment, and dining abound. Nice houses in desirable downtown neighborhoods can still be found for under $200K. Though summers can be hot and humid, there are four full seasons, and green abounds.

Our Retirement Criteria

As for us, with family increasingly spread around the country, and having spent most of the last two decades in the same location, we are ready for a change of scenery. Otherwise, we would have stayed in Chattanooga.

But now that we are on the move again, what are our location criteria this time around? When I go through my related lists and spreadsheets, here is what the ideal retirement location boils down to for us, in priority order:

Geography — Aesthetics are still #1. We want to live in a naturally beautiful place. I’m mostly a mountain person. Caroline is too, though she also loves beaches. So living in, or below, great mountains with excellent trail systems for hiking, biking, or climbing is what grabs my attention about an area. I can’t imagine living somewhere that I couldn’t easily escape to the rugged tranquility of high places….

Proximity — Being near family was always important, but has taken on a new dimension in later years. Unfortunately, with family members spread across much of the height and width of the country, it’s not a criteria that can be perfectly met. What’s required, practically speaking, is to be within driving distance of some of our important people, and near enough to a major airport (preferably no more than an hour on public transportation) so that we can reach the others easily when desired.

Climate — Physical comfort gets more important as the years pass by. We aren’t wimps. We love being outdoors in all kinds of conditions. But for day-to-day living, she’s sensitive to heat and humidity and I’d like to avoid cold and snow. So a temperate climate with moderate summers and winters is important to us. And yet we do like the seasons. We cherish every colorful fall spent in the eastern woods. And, though we love the exotic flora and dry heat of the great southwestern deserts, we can feel a bit parched and forsaken without some greenery around. Finally, Caroline loves to garden, especially vegetables. Needless to say, it’s hard to find a natural environment that satisfies all of these climate criteria! But that doesn’t stop us from searching….

Services — Next we come to the man-made world. We don’t care for the frenetic intensity of urban living, but we’ve seen enough of rural living to know that it probably wouldn’t suit us either. (It is hard to exist in a rural location without either being totally self sufficient, or spending lots of time in the car driving into town for stuff.) That’s why we lean to medium-size cities, populations of 100,000 plus/minus. These places have most of the services of major metropolitan areas, without most of the drawbacks — congestion, high cost, and crime. We like to have a variety of good dining options. And we’d like access to at least one large natural foods grocer. The only lingering requirement for locating in a truly major metropolitan area — and it’s an important one — might be health care. But that can be mostly resolved by living within an hour or two of a major city.

Cost — Finally we come to finances: the cost of living. For me, the most important cost variable from a retirement location perspective is housing. Though I don’t have figures at my fingertips, I suspect that national variations in the cost of real estate dwarf any such variations in other necessities such as food, fuel, or utilities. The latter are commodities in a national or regional market. Real estate, however, is always local — because you can’t import land. The cost of housing in an area is the largest single financial factor that we can’t directly control. Though we can optimize a bit by analyzing whether renting or buying is more advantageous, we need a nice, safe, quiet, 2-bedroom house or apartment and will have to accept the going rate in an area, within some fairly narrow parameters. In general, we can fine tune the other commodities as part of a frugal lifestyle.

Taxes — What about taxes? You often hear that income tax rates should be a major consideration for retirement location. And, sure, you’d be advised to perform some due diligence on your current versus prospective taxes before packing up the moving van. A couple of excellent sites for researching and comparing tax costs between states include Kiplinger and Retirement Living Information Center. However, as I’ve written before (Why I Don’t Fret About Taxes), I don’t see tax rates as a make or break issue for our own personal retirement location decision. For frugal and careful retirees in the lower tax brackets, standard deductions/exemptions plus fine-grained control over retirement income using a variety of sheltered and non-sheltered accounts can shield substantial income. It’s also important to look at the total tax picture for a state. Some states have no or low income tax, for example, but may compensate via higher sales or property taxes. It’s wise to understand your own lifestyle, tax bracket, and income sources, and the possible implications of tax rates in different locations. But I wouldn’t personally let this drive my relocation decision.

The Envelope, Please

So cost of living and taxes are definitely important items. I consider them, but they are last on a personal list that begins with geography. Why? It gets back to my philosophy, and quest for quality of life: Live a rich life. Follow your passions. Make today count. Then track and optimize your finances so you can do those things.

It’s the living that’s the point, not the cost of it. Of course you can’t ignore expenses. But I’d rather choose the location I want and configure my finances to be able to live there, than settle in a cheap location where I’d be miserable.

That equation doesn’t necessarily apply to everybody. If you’re a beach or water person, then I’m probably speaking your language here, though your preferred locations might be different. On the other hand, if you are somebody who can take or leave beaches or mountains, then you are fortunate indeed. You can live many more places happily, and can afford to optimize other criteria instead.

So what’s the verdict? Where are we going to live in retirement? I don’t have the precise answer just yet, but when all is said and done, our “short-list” for retirement living comes down to these areas:

  • northern Arizona around Sedona or Flagstaff
  • northern New Mexico centered on Santa Fe
  • the Colorado Front Range

I expect we’ll be settled in one of these locations by year’s end. To find out which one, stay in touch!

There are other places that we love or have heard great things about, and will definitely visit, but don’t expect to settle in, mostly due to lack of climate or proximity. These include:

  • Asheville, NC
  • Ashland, OR
  • Bar Harbor, ME
  • Bend, OR
  • Cape Cod, MA
  • Chattanooga, TN
  • Key West, FL
  • Lander, WY
  • New Paltz, NY
  • Tucson, AZ

We’ll continue to visit these places, and other new ones that we discover, and enjoy all that they have to offer.

So how about you? What are your most important criteria for retirement living? And which locations are at the top of your list?