As my husband and I talk about our vision for retirement, one of our goals is to join the ranks of millions of retirees who flock to warmer weather once the snow starts flying. While we love our life in Wisconsin, we hope to spend six weeks each winter in a warmer climate. Costa Rica is currently the leading choice.
At this point, we’re still years away from retiring. But we’ve already started doing research and talking with friends and family about their experiences as snowbirds. We’re learning a lot about what to expect and what to think about as we make our formal plans, including these six considerations:
You might want to consider renting — at least initially — before you buy.
RENT VS. OWN
When my husband and I first started talking about the possibility of becoming snowbirds, I was sure of one thing very early on: I’m not interested in buying a second home. I don’t want the worry of having to care for a property from 3,500 miles away. Plus, between the mortgage, property taxes and whatever upkeep might be needed, I’m pretty sure we could stay at the nicest hotel or rent a deluxe condo for six weeks a year and still come out ahead.
If you’re evaluating whether you should own your snowbird home, ask yourself these questions:
- Can you cover the cost of owning two homes?
- Are you sure you want to migrate to the same location each year?
- Are you comfortable hiring people to take care of the lawn or perform other maintenance when you’re not there?
- If you eventually choose to give up the snowbirding lifestyle (because your health declines or for any other reason), are you willing to bear the burden of selling your home from what might be a long distance?
If the answer to these questions is yes, owning your second home might be a good choice. Aside from the emotional benefits of have a place to call your own, there are financial advantages, too. The interest on the mortgage (if you have one) will be deductible, as will property taxes. And if you rent out one or both of your homes while you’re away, you may be able to offset many of your snowbirding expenses. Just be aware there can be some complicated tax issues if you rent out either home.
Still, you might want to consider renting — at least initially — before you buy. In fact, try renting more than once — and each time, stay for an increasingly longer period of time, perhaps trying out different communities. What might be amazing as a one-week vacation might not end up being where you want to live for several months each year.
One of the most important planning considerations for snowbirds is to make sure you'll have consistent access to health care coverage no matter where you are. If you stay in the U.S. and you're covered by traditional Medicare, you should be fine. If you have purchased a Medigap supplement, make certain that the policy benefits apply in each location, as certain supplemental policies provide coverage only if you go to providers in their network. And if you choose to enroll in a lower-cost Medicare Advantage plan, which operates similarly to an HMO within specific regions and localities, you may pay a lot more for medical services when you're away from your primary residence.
If you snowbird internationally, you won’t be covered by Medicare at all during the time you spend outside the U.S. And unfortunately, some of the most gorgeous locations in the world have the most rudimentary health care. So do your health care homework before choosing an international destination. There are lots of websites out there with information about government-run and private health-care systems in popular international locations.
While my husband and I plan to spend less than two months a year snowbirding, we’re probably the exception. Snowbirds often head south for six months or longer. If that’s your plan, and both places are in the U.S., consider establishing legal residency in whichever state has the best tax environment; it could save you tens of thousands of dollars a year. Tax-Rates.org can help you compare the tax rates (income, sales and property taxes) among the 50 states.
If you decide to establish residency in your newly adopted snowbird state, you’ll need to meet certain conditions. Typically, you’ll be required to:
- Live in that state for at least six months and one day each year.
- Change the address on legal documents, such as your bank and investment accounts.
- Get a driver’s license, register to vote and file taxes from your snowbird state.
Because every state has its own estate planning laws and requirements, you can’t assume that any documents you may already have in place — such as powers of attorney and your living will — will be legally recognized in your new snowbird state. So this is an area you’ll want to talk about with an estate planning attorney to review what you have and get what you need so you’re covered in both locations.
By its very nature, snowbirding requires a great deal of logistics management — much more so than if you were simply taking an extended vacation. You have to pack for six months, clean out the fridge, reroute your mail and keep up with your bills — and then do it all over again in another six months. You’ve got to be organized to move twice a year without feeling overwhelmed. And if you buy your second home, you’ll also have to be prepared to purchase everything from furniture to dishes and sheets to garbage cans.
Although you might be migrating to the destination of your dreams as a snowbird, you’ll need more than warm sunshine and an ocean breeze to be happy. My stepmother is a perfect example. When she’s away from home for two months each year, she really misses the things that matter: her kids and grandkids. We talk on the phone, but it doesn’t compare to the joy she gets from spending time with family in person. We’re her support system, and she’s happiest when she’s near. So as you think about snowbirding, be honest with yourself about whether trade-offs like this will be worth it.