Motley Fool Money - The Best Places to Retire, and Play It Safer Before Retirement

Starting point is 00:00:00 Where are the best places to retire and all the stock turmoil under the market surface? You're listening to the Saturday Personal Finance Edition of Motley Fool Money. I'm Robert Brokamp, and this week I invite fellow podcast regular Matt Frankel on the show to discuss a report published by the Motley Fool that ask people which factors make for a good place to retire and then identified the counties that are more likely to have those factors. But first, a few headlines that jumped out to me from this past week, As I'm sure you've seen, it's been a volatile year for the stock market, or has it? As of this taping on Thursday morning, the S.O.P. 500 is down around 3% for the year, but if you look

Starting point is 00:00:48 under the hood, you can see why it feels like a market of extremes. As highlighted in a March 13th Axios article by Emily Peck, 57 stocks and the SEP 500 are up by at least 20%, and 47 stocks are down by at least 20% based on data published by the bespoke investment group. Five of the 11 major market sectors are down for the year so far, with the worst being financials, down 10% partially unfears about the private credit market. And in a reversal of what we've seen for much of the past few years, the stocks of many tech-oriented companies have been foundering. The iShare's expanded tech software sector ETF, ticker IGV, has dropped 20% so far in

Starting point is 00:01:28 26. Of the six sectors that are in positive territory this year, the clear winner is energy, which is up 30%. What's an investor to do? Well, one step is to make sure you're sufficiently diversified. I've mentioned on the show before that we have the Motley Fool believe you should own at least 25 stocks, but in his recent quarterly call with premium members, Motley Fool co-founder and CEO Tom Gardner suggested that numbers should be moved up to 50 stocks. Tom pointed out that the market is still richly valued, and an internal tool we've created

Starting point is 00:01:57 suggests that the SEP 500 will provide slightly below average returns over the next decade, but perhaps with higher levels of volatility. diversification can help you write out the bumps and, in Tom's words, commit to being a lifelong investor. Of course, diversification isn't just about stocks. It's also about holding some cash and bonds, especially if you're getting closer to your goals. This brings us to our next item, which is an article on the ThinkAdvisor website written by David Blanchett, Michael Thinka and Wade Fow, three of the nation's leading retirement experts who have each been guests on this show in the past. The title of the article is Exploring the Retirement Risk Zone, which is a time period,

Starting point is 00:02:34 years before and several years after retirement when a bare market can significantly change your retirement plans. For the article, they analyzed how annual portfolio returns for the 20 years before and the 20 years after retirement are correlated with retirement spending outcomes. The result, quote, returns immediately before retirement have the greatest impact on retirement spending, and as an individual approaches retirement, the importance increases each year. Returns immediately after are also important, but the impact of returns falls more rapidly, such that the return five years after retirement matters about as much as the return 10 years before retirement. End of quote. The takeaway is that once you're within a decade of retirement, it might be time

Starting point is 00:03:18 to start playing it safer with a portion of your portfolio, especially if you've already saved enough to beat your goals. What does that mean from an asset allocation perspective? The article didn't say, but I recently calculated the average allocations of the target date funds offered by the five biggest providers, American funds, BlackRock, Fidelity, T-Roe Price, and Vanguard. For the 2030-30 funds, the average allocation was 50% stocks, 43% cash and bonds, and for the 2035 funds, it was 67% stocks, 33% cash and bonds. Keep in mind that Target Date funds are meant for investors with a moderate risk tolerance, which might be too tame for many Motley Fool podcast listeners. But for those in the retirement risk zone, it might make sense that

Starting point is 00:04:01 dial back your appetite for risk just a bit so that you can still retire when and how you want. And speaking of bonds, let's get to the number of the week, which is 4.32%. That's the yield on the 10-year Treasury as of Thursday morning, up from 3.97% on February 27th, the day before the start of the war in Iran. Now, this might be surprising. Geopolitical events often cause a flight to safety with investors rushing into treasuries and causing yields to drop. Why not this time? Well, it could. be because inflation, which was already creeping up, will be driven even higher due to skyrocketing oil prices. Inflation is one of the biggest nemesies to bond investors, so perhaps they're now requiring

Starting point is 00:04:41 a higher yield to compensate for the greater risk. And we may not get as much relief from the Federal Reserve as experts were expecting earlier in the year. On Wednesday of this week, the Fed concluded its latest meeting and kept rates where they are. According to Bloomberg's Jonathan authors, Fed futures were predicting three rate cuts on the eve of the war, but now it's down to one. And higher rates are a worldwide phenomenon, as authors wrote, quote, the Fed is a global outlier as it's still expected to cut. Each of the nine other largest developed market central banks is now forecast to hike. End of quote. Higher rates will not only affect our portfolios, but also our borrowing costs. The rate on a 30-year mortgage has risen from 5.99% on February 27th to

Starting point is 00:05:25 6.36% according to Mortgage News Daily. You might be considering a mortgage if you plan to move in retirement. Where are the best places to retire? That's the topic of our next discussion when Motleyful Money continues. Getting ready for a game means being ready for anything. Like packing a spare stick. I like to be prepared. That's why remember 988, Canada's suicide crisis helpline. It's good to know just in case. Anyone can call or text for free confidential support from a train responder anytime. 988 suicide crisis helpline is funded by the government in Canada. number one investing goal of most Americans is retirement. And a key determinant of happiness and retirement is where you live. Which factors are most important? And where are the places

Starting point is 00:06:17 that have those factors? To answer those questions, we at the Motley Fool surveyed Americans ages 55 and older. And here to help discuss the results is fellow certified financial planner and real estate expert Matt Frankl. Thanks for joining us, Matt. Yeah, thanks for having me. It's always great to talk about this kind of stuff. So there are two aspects of the report that I think are interesting. First, I think it partially answers the question of what makes for a good retirement in general. And secondly, it suggests places where that can be found. So let's get into the methodology a little bit. So based on the survey results, we, and by we, I mean some of our colleagues at the Bolly Fool, not specifically Matt and me. But we identified seven key retirement factors and weighted

Starting point is 00:06:55 each according to the preferences of the survey participants. So coming in, number one, was quality of life, had a 31% weighting. Next was health care, access, and quality, 15% waiting. Housing affordability, 13%, crime and safety, 12%. Weather and climate, 12%, state and local taxes, 11%. And non-housing affordability, 6%. So that biggest weighted factor was quality of life, being more than twice as important as any other factor.

Starting point is 00:07:20 But what did the study find were important components of quality life? Well, based on the survey results, we consider features such as restaurant options, walkability, access to out. outdoor recreation, proximity to airports, and availability of arts and entertainment. So that's what's behind the study. Matt, what's your take on what the report found as being important about a location when it comes to retirement happiness? Now, obviously, different factors are important to different people.

Starting point is 00:07:45 For example, my wife can't stand to be cold, period. So climate and weather would definitely play a role, even over things like housing affordability in a lot of cases for us. But, you know, I totally understand where the methodology came. from quality of life, for example. It totally makes sense that's number one. The number one retirement killer is boredom, right? Everyone, you know, that's been well documented that, you know, people want to,

Starting point is 00:08:11 things to do when they leave the workforce. So that makes a lot of sense. Healthcare access obviously makes sense. You use health care several times more after you're retired than you do when you're still working. But it is very personal specific and there are other factors that matter to a lot of people. You know, for example, proximity to your family and friends. My parents wouldn't move to one of these top counties if it was free because their

Starting point is 00:08:34 grandchildren are here. You know, there's a lot of different moving parts here, which is why we gave, you know, 50 different locations instead of just naming one for everybody. Right. When you lump all the financial factors together, which were housing affordability, not housing affordability in taxes, they add up to 30%. So put together, they're close to the same waiting as quality of life. And, you know, for some people, that might be more important,

Starting point is 00:08:56 especially if they retired, but they don't have, you know, a huge margin of error in terms of their net worth and their income, or if they just want financial peace of mind in retirement, like that affordability issue is going to be one of the more bigger aspects for them. And I'll say, as someone who takes a walk every day, I love that walkability was number two on the quality of life factor. So that's great. Okay, so based on the survey results, we determine the factors that indicated locations would be a good place to retire. We then use various sources of info to see which counties had those factors. But first, they had to beat certain criteria. So, for example, we excluded counties with less than 40,000 people and those that rated poorly on factors such as affordability.

Starting point is 00:09:34 In the report, as Matt mentioned, we highlight the top 50 places to retire, but for this podcast, we'll just list the top 10. And again, we looked at county level info, but for the most part, each county owes its attractiveness to its most prominent city. So we'll list that too. We're going to do the top 10 here going in reverse David Letterman-style, so number 10, Armstrong County, Pennsylvania, which is not too far for Pittsburgh. Number nine, Miami-Dade County, Florida. Number eight, Milwaukee County, Wisconsin. Number seven, Ramsey County, Minnesota, home of St. Paul. Number six, Philadelphia County, Pennsylvania. Number five, Pulaski County, Arkansas, home to Little Rock. Four, Cuyogi County in Ohio, home to Cleveland. Number three, Gadsden County, Florida, with Quincy. Number two, St. St. John's County,

Starting point is 00:10:21 Florida with St. Augustine and number one of the best place to retire is Broward County, Florida, home of Fort Lauderdale. Matt, your thoughts on the rankings? There were a few surprises to be. So I'm going to name my top four surprises here. So number one is that there was nothing from South Carolina where I live, not just because I live here, obviously, but because it did rank number one in net migration in the United States recently. Half of my neighborhood is retired people from somewhere else. We have great weather, great costs of living. It's still relatively affordable to buy a house. So I was surprised to see nothing from South Carolina. There was one county from North Carolina on the list, way down the list.

Starting point is 00:11:00 So that was a surprise to me. I was surprised to see Baltimore on the list just because I personally don't normally think of it as a retirement destination, but it makes a lot of sense. And, you know, that's a great example of there's many different sides to some of these cities. There are parts of Fort Lauderdale, which was number one, that I would never live if I was a retiree. And there are there are parts that I could see myself having a great retirement. So within some of these cities, there's a lot of different variety. So that's surprise number two. Number three, I am not surprised that Florida dominated the top of the list. You know, no state income tax, so you know, you can't really dame for that. Retiree friendly property tax structure is something that doesn't get

Starting point is 00:11:39 quite as much attention. Obviously, it's warm in Florida. And there are some surprisingly low-cost areas. Florida's thought of as an expensive place to live. You know, that's true in downtown Miami and downtown Fort Lauderdale. But, you know, on the outskirts where a lot of retirees live, that's not the case. It's still relatively affordable. A little surprised Miami-Dade made the top 10 just for the affordability factor alone. And number four, I'm surprised to see my home city where I grew up of Philadelphia toward the top of the list. But when you think about it, it makes a lot of sense. A lot of retirees want to be away from cities, but a lot of them like being in cities. And it can be a very affordable alternative for city lovers compared to the, you know,

Starting point is 00:12:18 the two closest cities to Philadelphia are in New York City and D.C. Philadelphia is a much more affordable place to live than either of those. Yeah, I live in North Virginia now, but I grew up in Florida outside of Tampa, Pinellas County, and Hillsborough County, home of Tampa. Both of them made the top 25, so I'm not surprised at that. St. Augustine, my favorite city in Florida, I'm not surprised to see that as number two. What was interesting, though, is St. Augustine had the second highest quality of life score, but a really low health care score, which I was not aware of because I've never had to go to a hospital and say, but I think that's an important part of evaluating places.

Starting point is 00:12:54 You may like the place because it has a low cost of living or you like the museums or being close to the water. But if you've got health issues, you've got to make sure that it's going to have a good health care system. Related to your Philadelphia comment, I was not surprised to see so many locations in Pennsylvania. Pennsylvania, I think, is a very underrated state. Lots of good locations.

Starting point is 00:13:13 Love Pittsburgh. Some parts of Philadelphia, expensive and high crime. so you have to be careful. But I think what's important about the report is it did look at the county level. So it's probably more thinking in terms of more of the suburbs of Philadelphia. And I did notice that there were other places like Miami that are not cheap. So it's clear that there are other aspects, their health care, quality of life, are high enough to outweigh the costs there. Let's move on to talking about relocating in retirement.

Starting point is 00:13:40 So according to transamerica, 30% of Americans move after they retire. What do you think people should consider when deciding to move in retirement? If you ask all of my older relatives, they consider where I live. That was their number one factor. They all came to me. They wanted to be near their grandkids and things like that. But that is something to consider. But there are some other things as well.

Starting point is 00:14:01 You mentioned access to health care. If that is a big deal for you, that should be definitely be toward the top of the list. My wife and I met in Key West Florida. So we lived in Florida. There's almost no access to health care without driving four hours to Miami. So that would be a limiting factor for us. It's not just that there's no access to health care. It's just inconvenient access to health care.

Starting point is 00:14:20 Your personal financial situation, obviously places like the queues wouldn't make sense if you are on a budget. We mentioned tax-friendliness is a factor in the financial situation. That can vary by income level. Some states are much more tax-friendly to lower income brackets than others. Some are really high-tax states, but only for people toward the top of the spectrum.

Starting point is 00:14:40 So that's definitely something to think about. And also the practicality of your current situation. A lot of people, I don't have the exact statistic in front of me, but aging in places has been a big trend in the United States for a while. You know, keeping your current home, the same house where you raised your kids, things like that. If you get to age 70 and you can't climb stairs, that could be a limiting factor. Does your current home and your current location walkability, driveability, you know, within a close proximity of your doctor's office, for example, it might meet your needs when you're in your mid-60s. will that meet your needs when you're 75, when you're 85? So I would say have a much longer time horizon when you're considering all of the factors that we discussed earlier.

Starting point is 00:15:19 Yeah, when you look at the rankings of most stressful life events, both moving in retirement often make the lists. Yesterday I read an article about job transitions and someone put in the comments that he had recently retired. And he wrote, quote, to my surprise, the emotional aspect of this change has knocked me off my feet. So, you know, both retiring and moving at the same time might be a big change. So I would say that's something to consider. I think it's probably a good idea to do a test run by maybe renting an Airbnb in a new area for a few weeks, maybe a few months,

Starting point is 00:15:48 maybe at different seasons. So you understand sort of basically the true field, the location, whether you'll be happy there. You mentioned the social stuff, and I think that's always important, right? Do you want to leave your friends? Surprisingly, perhaps, the research on whether moving closer to grandchildren

Starting point is 00:16:03 is mixed. I have found studies that found, like the happiest retirees are those who live within two to three hours of grandkids. Other studies have found that people who move closer to grandkids end up being dissatisfied because they basically thought they were going to be a bigger part of their kids' lives and they ended up not really happening. You know, their kids had their own schedules, their own things going on. The grandparents left their own social circles to move closer to kids

Starting point is 00:16:27 and didn't quite turn out the way they thought. So put a little thought into that in your family structure and how close you all are before you pick up and move for the grandkids. And then the final thing I think is important to point out is that, you know, if you're downsizing or moving, moving from a higher cost area to lower cost area, you could significantly boost your retirement security by moving in retirement, right? You not only could realize some home equity, boost your portfolio a little bit, the lower cost area is lower cost in many ways. It might have lower utility costs, lower taxes, lower upkeep costs, and that could result in a retirement that either moves up the timeline. You could retire a couple of years sooner or maybe have higher income

Starting point is 00:17:04 while you're in retirement. All right, Matt, let's go to the final question here. So some people may think that where to live in retirement isn't in either or question, right? They could keep their home and their current state, but then get a place in Florida or wherever and rent it out when they're not using it. And while you're not retired, this is something you've been doing, right? So you have your home in South Carolina, but you do have a home in Florida that you use for vacations and you rent out. So give us your general take on maintaining more than one home and being a landlord. Well, yeah, so like I said, so all of our older relatives, my wife and my own, all moved to be near us where the grandkids are. So I couldn't in good conscience get away with moving to Florida

Starting point is 00:17:43 right now. But we did the next best thing and we bought a vacation home in Florida. You know, we're those weird adults that like Disney World still. So ours is right near the Disney parks. It's in Osceola County, which is where Kissimmee is. It's definitely a big part of our retirement strategy to probably eventually move down there. But that could be a great retirement strategy too, especially with modern options. If you ask for retirement advice on how to do this 20 years ago, things like Airbnb didn't really exist to you as an option. You know, short-term vacation rental managers used to take about 50% of the rent. I pay 15% of the rent. A lot more technology in the industry has made it a lot more affordable and practical to have a second home, especially if you're not

Starting point is 00:18:23 that worried about making money. If you just generally want to be able to afford to have two places, there's a lot of things that are practical now that weren't practical 20 years ago. So that is, it's definitely not necessarily in either or. Or alternatively, you can have an Airbnb that's near your grandkids and live where you really, really want to live. That's another possibility. You know, if my kids end up in South Carolina where we are now, I could definitely see my wife and I living in the Florida house and keeping the one we have now just, you know, and renting it out and we're not here. There's a lot of flexibility in that. And like I said, the options have definitely evolved considerably and just how easy it is to manage a vacation rental from far away has evolved considerably.

Starting point is 00:19:03 over the past couple of decades. So it's a real possibility. I'm not at retirement age yet, but I can't see us not doing this if we're still loving the house. That was great to hear. Thank you for joining us, Matt. And if you, dear podcast listener,

Starting point is 00:19:15 want to read our entire report about the best places to retire, visit fool.com forward slash research, forward slash best dash places dash 2 dash retire. Thanks, Matt. Thanks for having me. In January of 1915, Ernest Shackleton's ship,

Starting point is 00:19:32 endurance became encased in the ice in the Weddle Sea. Through determination, grit and savvy, Shackleton would lead his men through a brutal winter, then over hundreds of miles of Antarctic ice, followed by 800 miles across some of the roughest waters in the world. It is one of the most extraordinary and inspirational journeys in the history of exploration. Find this story and many others at the Explorers Podcast, available wherever you get your podcasts or at Explorespodcast.com. It's time to get a town, fools, and a recent Wall Street Journal article highlighted something that I think is good news. The title of the article is, America now has more spas and gyms than stores selling actual stuff.

Starting point is 00:20:13 I consider this good news because the evidence is clear that healthier people are wealthier and vice versa, the causes and effects go both ways. Healthier people are more productive and spend less money on medical bills, and wealthier people can afford better health care and, well, memberships to spas and gyms. but you don't need to pay for a membership to get healthier. Even a daily walk can do wonders. According to a 2023 study, walking briskly for 30 minutes, five days a week,

Starting point is 00:20:40 decreases the risk of severity of various health outcomes, such as cardiovascular disease, type two diabetes, cognitive impairment, and dementia, while also improving mental well-being, sleep, and longevity. Plus, let's bring around the corner, it's a great time to get out for a run or a bike ride. I find it helps to commit to doing an event that you have to train for, such as maybe a 5K or 10K run in the summer.

Starting point is 00:21:02 If you enjoy biking and really want a challenge, consider Ragbri, sponsored by the Des Moines Register. Regbi stands for the Register's annual great bicycle ride across Iowa, and it's the world's oldest, largest, and longest recreational bike touring event. You'll spend seven days cycling 400 miles along with 20,000 of your new friends. If you do it, keep an eye out for me. I'll be the goofball pedaling a recumbent truck up and down those hills, because believe me, Iowa.

Starting point is 00:21:29 is not flat. And that, my Foolish Friends, is the show. Thanks for spending part of your weekend with us, and thanks, as always, to Part Shannon, the engineer for this episode. People on the program may have interest in the investments they talk about, and the Molly Fool may have formal recommendations for or against. So don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards.

Starting point is 00:21:52 It is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody.

Motley Fool Money - The Best Places to Retire, and Play It Safer Before Retirement

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