Early Retirement: Where to Live?

by Philip Greenspun in September 2005

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Choosing a place to live is easy for working people. If you graduate from college and are offered three jobs in two different cities, you will choose from those two cities. If you're retired, however, you are unconstrained by proximity to a job; your money can follow you to any of the 50 United States or the approximately 200 other countries in the world. Retirees with a spouse and children have the easiest time. They'll probably stay where they are for the kids' schools and will almost certainly stay in the same place every academic year. A single retiree, however, can choose to spread his or her life among six apartments in four countries.

Why do so many retirees move to California, Florida, and the Southwest? Good weather is much more important to a retired person than a working person. Suppose that you live in Massachusetts and a dreary cold windy rain comes in for seven days? You might be upset at losing a weekend of hiking but for the five days that you had planned to be at work, you haven't really lost anything. You were going to be stuck indoors anyway, so what difference does it make that it is raining outside? In fact, one nice thing about most offices is that they tend to be large soaring well-lit spaces with longer sight lines even than the largest private dwelling.

Given how constrained and therefore easy the choices for married people are, let's consider the challenge of finding a good place to live for a retired single male. Here are some criteria:

Some of these criteria are simple. You can look up crime rates and lower is clearly better.

Taxes are almost as simple as they appear. You can go to Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming and stop paying state income tax (New Hampshire taxes dividends and interest, the two kinds of income that retired people receive). Some of the states with high overall taxes, as a percentage of income, are the obvious places afflicted with bloated government, corruption, and inefficiency, e.g., the District of Columbia, New York, and Rhode Island. Massachusetts isn't as bad as you'd expect, however, because the residents are so well-educated and energetic that they can afford to be bled. Conversely, Maine ends up being the highest tax burden state in the union, collecting 13 percent of income (against New Hampshire's 7.4 percent). Maine wants to pay its police officers, schoolteachers, and bureaucrats a similar salary to what these folks would earn in Massachusetts. However, the population of Maine is comparatively poorly educated and paid, so the result is taxes that are much higher as a percentage of income and wealth.

Cost of living is not simply "lower is better." The cost of living in San Francisco or Manhattan is higher than in Peoria, Illinois. To some extent, this is because San Francisco and Manhattan are crowded. But much of the cost difference can be attributed to the fact that it is more enjoyable to live in Manhattan or San Francisco than Peoria. Being around smart people is a huge luxury. Intelligent, well-educated people are much more interesting than people with low IQs who haven't read or studied too much. Unfortunately for those who are retired on a fixed income, smart people tend to find clever ways to make money and this drives up the cost of housing in areas where they congregate. If New Yorkers weren't so damn good at skimming money from Midwestern mutual fund investors and looting from public corporations, you wouldn't find that larger apartments in Manhattan had been bid up to $10 million.

Quality of climate is not so simple, either. If you like long hours of daylight and moderate temperatures, the Kenai Peninsula of Alaska is a fabulous place to live from May through September. You might not enjoy being there in January, however. And being in Alaska certainly scores poorly on the "availability of single women" criterion.

A lot of smaller towns that host elite colleges and universities might seem attractive at first glance. Consider Williamstown, Massachusetts, for example, home of Williams College, one of the best liberal arts schools in the U.S. The town is set in the Berkshires, with a mild summer climate and lots of scenic lakes and woods. There are similar towns and colleges in Vermont, New Hampshire, and Maine. Unfortunately, what nearly all having in common is an academic calendar that runs September through May. Perversely, they send the students home and the professors away during the only time of year when it is actually pleasant to be on campus.

A surprising number of young retirees are single. This is partly due to the great wealth created in high-tech in the 1990s. Guys retiring out of those companies tend to be computer programmers, a group shunned by the female sex. Most young retirees had to work long hours before they retired. A person who works long hours is not going to be interesting to a discriminating member of the opposite sex. What can a guy who works 80 hours per week talk about except his job? He won't have read the latest books, seen the latest movies, learned any new skills, or met any fun people. If one of the things that you'd pushed aside during your working years was dating and marriage, it would not be wise to move to an isolated mountain top. If you look at Census Bureau statistics, you'll see that places with scenic beauty, outdoor recreation, and a flood of newcomers tend to be places with a huge surplus of single men. Alaska and Hawaii, for example, have more men than women. If you go to a place such as Moab, Utah, where mountain bikers love to congregate you will see groups of ten guys congregating after dark. Cities with technical and manufacturing jobs tend to have more men (Boston, Silicon Valley). Cities with administrative jobs tend to have a surplus of women (New York, Washington, D.C.).

The Beach House

Oceanfront property has become ridiculously expensive in the U.S. A nice place on Nantucket, for example, will set you back $5-10 million. If you just love the people who hang out on Nantucket and want to socialize with them, it might be worth paying $10 million to get into the club. If you love the beach, on the other hand, reflect that you could buy 100 acres of beachfront land on Prince Edward Island for around $150,000. You can buy your own brand-new twin-engine business jet from Eclipse Aviation for $1.3 million. With the $10 million for the Nantucket house you can afford a beach house in Canada, a beach house in Latin America, a mansion in a Midwestern university town, a lifetime salary for a professional pilot, a lifetime supply of jet fuel and maintenance, and still have plenty of cash left over for furniture, hotel rooms, etc.

The Ranch

Jackson, Wyoming is a lovely town if you want to hang out with rich guys like Dick Cheney who come here to escape state income taxes. About ninety percent of the local population is employed in the real estate industry and they will be happy to sell you a $10 million mini-ranch. As with the beach house, however, note that you could buy a huge ranch in Alaska, a huge ranch in Argentina or Chile, and a lifetime stack of first class airline tickets to shuttle between them as the seasons change.

The Yachting Destination

Newport, Rhode Island has some moderately nice oceanfront houses starting at $5 million, and it is a good place to attend parties. But if you live in Manhattan, for example, instead of the 2nd home in Newport you could simply charter a turbine-powered helicopter to take you from the East 34th Street Heliport and drop you onto the front lawn of anyone who has invited you to their party. Even at $1,000 per helicopter hour, it will take quite a few round-trips per season before you come close to the cost of paying for property tax and maintenance on an old $5 million house.

The Caribbean

On paper and in photographs, the Caribbean looks great. Unfortunately, most of the islands have been stripped of all of their smart people, in a brain drain that has been going on for decades. If you want to watch the sunset every night with gin-soaked expatriates, you might enjoy some of the better islands, e.g., Anguilla.

Places worth looking

The author of this article has visited more than 50 countries, all 50 of the United States, and every province and territory of Canada (including Nunavut).

Manhattan is a surprisingly good place for someone who has retired young. Although the cost of living is high, it is impossible to beat the variety of cultural attractions and the opportunities for socializing. New York City is also one of the world's best air travel hubs. You can get almost anywhere on an inexpensive non-stop flight. Problems with New York include the risk of terrorism--if Al-Qaeda gets a nuclear bomb this is where they will detonate it--and, for aviation enthusiasts, the fairly long drive to airports where it is reasonable to keep a small airplane or helicopter.

The Boston area and Cambridge, Massachusetts in particular are great for people who like to learn new things. Downtown San Francisco and Berkeley offer similar advantages plus a milder climate. I prefer Boston because it is less crowded and the traffic is not as crazy. Also, you can take your dog on public transit in Boston.

Washington, D.C. has a tremendous supply of free cultural events. You can go to lectures at museums every day, attend free movies and live theatricals, enjoy city parks, ride the Metro (not dog-friendly, sadly). Most of your fun will be paid for by taxpayers in the Midwest. If you don't want to deal with the crime, corruption, and incompetence of the D.C. local government, rent yourself an apartment above the Bethesda metro station, just over the line into Montgomery County, Maryland.

Smaller towns with good colleges and universities: Ithaca, New York (Cornell); Madison, Wisconsin; Ann Arbor, Michigan (somewhat expensive due to proximity to Detroit); Athens, Georgia; Boulder, Colorado (expensive but good for lovers of the outdoors); Missoula, Montana; Lawrence, Kansas; State College, Pennsylvania; Charlottesville, Virginia; Iowa City, Iowa; Lincoln, Nebraska.

Good places for aviation: Spokane, Washington (cheap housing; clear weather); St. Paul, Minnesota (downtown airport); Burlington, Vermont; Sedona, Arizona; Santa Fe and Albuquerque, New Mexico.

Homer, Alaska has a mild climate (for Alaska), fabulous mountain and glacier views from almost every house (a really nice house is $200,000 to $300,000). There are always lots of relaxed tourists and fishermen in town. You can go out in a boat or wade into a stream and rescue a Halibut or Salmon from its watery hell. The local airport has a runway long enough for jets and air taxi services that will take you across the Cook Inlet to watch brown bears catching salmon. There are four commercial flights per day to Anchorage or you can fly there yourself in a light plane in about 45 minutes without having to climb above 1000'. A great place to spend May through September.

Mexico has a tremendous number of attractive towns and consistently rates as one of the happiest countries on Earth. The canonical gringo hangouts at San Miguel de Allende, Oaxaca, the Pacific coast, and anywhere in Baja California.

Argentina and Chile are great places to go when the days get short up here in the Northern Hemisphere. Argentina is ridiculously cheap and has a great tradition of culture, cuisine, and education. Chile is more stable and orderly and has a lower crime rate. If you're looking for an English-speaking place in the Southern Hemisphere, New Zealand and Australia are both beautiful with friendly people. New Zealand is mountainous and can be cold, windy, and rainy even in the summer. Australia has a broad range of climates but most of the country is very hot in December and January.

Most of Europe is simply too crowded and expensive to be attractive to the average North American.

Most of Asia is too strange and far away to appeal to the average North American. Nonetheless, there are a lot of expatriates who've found their Buddhist bliss in Thailand, a country with an excellent infrastructure and stable government.

Consider Renting

If you can rent anything decent, try to avoid buying property. Think about the most interesting people you know. Chances are, most of them are renters. People who rent talk about the books that they've read, the trips that they've taken, the skills that they are learning, the friends whose company they are enjoying. Property owners complain about the local politicians, the high rate of property tax, the difficulty of finding competent tradespeople, the high value of their own (very likely crummy) house or condo, and what kinds of furniture and kitchen appliances they are contemplating buying. Property owners are boring. The most boring parts of a property owner's personality are those which relate to his or her ownership of real estate.

More

If you came here via a search engine, you might want to go back to my main page on early retirement.
Text and pictures copyright 2005 Philip Greenspun
philg@mit.edu

Reader's Comments

I'm 32, and I plan on retiring early. I'm spending my days building money-printing machines -- primarily real estate and Internet properties. Hopefully they won't need me around too much to keep them oiled. I would like to second his investment advice; so far it's worked for me.

My plan for early retirement aims to deal with many of the issues Philip raises is to buy a sailboatboat, big enough to take me, my companion, and the odd crewmember, hither and yon, primarily in the caribbean. The benefits in personal energy, adventure, travel, and an inexpensive home will be many-fold. I look forward to it.

-- Stephen van Egmond, April 2, 2006

At the moment I rent two bedrooms in a house in Tarija, Bolivia, for USD160 per month. Gas, water, electricity included.

During the last twelve months I have lived in the Cayman Islands, France, and Bolivia. Renting and moving around a lot gives flexibility and forces you to reduce your material goods.

What does 'retire' mean? According to Webster it means 'to withdraw from one's position or occupation : conclude one's working or professional career.' Well, if that is the case I am half retired. I have withdrawn, but I have not concluded. Neither do I think you have.

I think 'owner of your time', 'ooyt' for short, is a more interesting word than 'retired'. If you do what you like, professionally and privately, you are ooyt. If you work in a bank and hate it, or play tennis with your neighbour and hate it, you are not ooyt.

-- Jan Nordgreen, March 8, 2007

I have lived in Europe for the past 6 years and I disagree that most average Americans should not consider Europe because it is "too crowded and expensive". There are many places that are both incredibly beautiful and not very expensive -- such as Scotland (Especially the Highlands); SW France (especially along the Pyranees); Southernmost parts of Italy; Inland Spain; Portugal (especially Duoro Valley)and many parts of Eastern Europe. Culture and food can't be beat. Plus if you become resident you don't have to worry about paying for (generally very good quality) medical care anywhere in Europe and you get an $80,000 income tax exclusion from Uncle SAM. Also if you own property the real estate tax rates are almost non-existent in most of Europe.

-- Richard Waryn, May 25, 2007
One major factor in the renting vs buying tradeoff is how much and how long you're going to use something. If the thing can spend most of its time being used by others, renting may be more convenient.

If you're going to spend a month a year at a vacation home, owning the whole vacation home (ignoring the possibility of owning a timeshare) may be more expensive than renting because you have to absorb the costs for the 11 months that you aren't there. Of course, you could find renters for the other 11 months (unless it's a property that's only attractive during part of the year, in which case you can probably still find renters for some of the time), but then you have to deal with those renters and still have to deal with keeping the place maintained.

And for a vacation home, renting also means that if you discover you don't like the place, not coming back next year becomes easier.

Owning a primary home would give me some stability I'd really kind of like that I don't really have as a renter at the moment.

I also think a lot of the maintenance issues associated with ownership can probably be controlled with planning. My parents have a swimming pool, and maintaining the right chemical balance there takes some effort; I will probably not buy a home with a swimming pool. Maintaining the yard also seems to take some of my parents' time, and this may be an argument for having a smaller yard. The condition the property starts out in is likely also a factor in how much hassle it is in the long run, though if you have a good contractor you're willing to pay, maybe it's not a huge problem.

And I wonder if some of the problems with finding good tradespeople happen to people who bought a house that they could barely afford, thus making good maintenance difficult to afford.

Other examples of things that can be worth renting if you don't need the whole thing are cars (if you live in an area where parking is difficult and public transit is good) and fractions of colocated servers (if you don't need a whole server to meet your capacity needs; the virtual server offerings have gotten quite good in the last few years). And I have to wonder if renting from NetJets would get you a bigger cabin for the same number of dollars as owning a VLJ, while saving many of the paperwork hassles that I hear can come from owning a sufficiently complicated plane..

-- Joel Weber, July 23, 2007

I have been living in Canada for 11j years already and what is of good here is work only, nothing else. Nothing connects the people here and is not very socializing country. Also is expensive for a retired person live here or in the States in general. Since mostly or the retires look forward low expenses places, quality of live and nice people for a place to retire I am considering partially retire from Winter time in Canada and live in some place in Brazil, some of the places are very affordable. Specially in the north of Brazil or the suburbs. Criminallity exists, but you have to know to survive, you can be overprotected all your life by the Queen or Uncle Sam, don't you? So be mature and adapt to other scenario. I live in Rio before and criminallity exist, also a monster inflation but there is the beach, the fun and the currency benefits. Somebody told me also that Nicaragua is getting one of the places more affordables to live for retired North Americans, but I don't know too much of that country, so far Americans beging to retire there, cost of living is going to increase, as is happening in Costa Rica. For an inmigrant who plain to retire from America, some things tends to be easier than from native Americans or Canadians, but not always the country of origin is good either. For instance Uruguay, is one of the most expensive countries in South America to live, but is quiet, with people well educated and free medical assistance and education. What I am tired of is of this f. Canadian time it goes from -30 to +30 and the indifferent people and the system where you have to pay for everything an expensive price. (even to find a date)

-- pablo jimenez, October 28, 2007
New Zealand is beautiful, but NO longer cheap to live, and property is really high at the moment. Kiwis mean you no harm, but they are not really into socializing with expats, and have a limited point of view. It does get cold down here!

-- max cruise, August 14, 2008
Sorry, PG, I disagree with several angles you gloss over. First, no retiree should ever feel "constrained" to live anywhere. Half the fun of retirement comes from freedom and endless possibilities. Neither adult children, friendships, or a spouse should make our place of retirement decision for us. If we choose to live near friends or family, we ignore the transient nature of modern life. Our kids and our friends both have a tendency to disappear or move on. We have to have lives apart from them. Spouses and partners need to form part of the team for a choice of location, but again, if they feel "constrained" in their selection then they build their own prison.

-- James Medeiros, September 16, 2008
Great and brief coverage. I couldn't agree more. I guess I'll rent...the question is, where?

-- john Hudelson, July 3, 2012
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