Florida is one of the most well-known retirement destinations in the United States. Due to its immense size and diverse demographic makeup, the state offers a personalized retirement for any senior citizen, no matter the goals, lifestyle, or health condition. People who look forward to relaxation after years of hard work can soak up the sun on a secluded beach, play a round of golf, have coffee with neighbors, or entertain the grandchildren at a local park or at a large attraction such as Disney World. For individuals who do not want to stop yet, a Florida retirement can present opportunities for traveling to bucket list locales, volunteering at a favorite charity, or learning a new skill or hobby.
Since Florida retirement planning can be complicated and time-consuming, the tips below simplify the process. This guide explains how to enjoy a long, worry-free retirement in Florida, how to estimate and save the money needed to secure that retirement, and how to take action to retire earlier and longer.
Top Reasons for Retiring in Florida
Nearly 1000 people move into Florida every day, according to the State of Florida’s estimations. Many of these new residents are senior citizens; in fact, almost 20% of Florida’s 19 million residents are age 65 or older. Each individual has his/her own reasons for retiring in the Sunshine State, but some of the more popular decision factors include the climate, healthcare, cost of living, and recreational opportunities.
Weather and Climate
Due to the warm air from the Atlantic Ocean and Gulf of Mexico, Florida’s subtropical climate yields pleasant weather year-round. January lows generally dip into the 40s in northern Florida and mid-50s in southern Florida, while summer temperatures can reach into the 90s but seldom top 100 degrees. Snow is rare. Florida’s weather does tend to be hot and humid in the summer, and residents should prepare for tropical storms and hurricanes, especially between June 1 and November 30.
Healthcare and Government
To cater to the large number of elderly residents, communities throughout Florida offer a range of top-notch hospitals, medical specialists, doctors, clinics, nursing homes, and hospices supporting patients with Medicare and private insurance. In addition, local laws in many areas focus on the interests of the aging population.
Cost of Living
Florida has a mix of high-cost/high-rent areas and reasonably priced housing communities that offer an affordable lifestyle. Due to the population differences, the cost of living is generally lower in Florida’s northern and inland towns than in southern and coastal cities. Affordable housing can be found in most locations, but some popular spots demonstrate heated real estate markets and high price tags.
Taxes are a key concern for any retiree. The Tax Foundation, a nonpartisan tax research group, ranks Florida as number 47 out of the 50 states for having the lowest overall tax burden. Florida is one of only seven states with no state income tax, and the state provides property tax exemptions for senior residents. Floridians pay only 7.4% of their income toward state and local taxes, as compared to 9.7% nationally. Sales taxes are slightly higher, but in-line, with the U.S. average.
Recreation and Lifestyle
Florida features communities that can meet anyone’s needs–from beautiful countryside, orange groves, and undeveloped beaches to large metropolises, jet-setting party places, and cultural hotspots. Within these areas, residents can enjoy micro-communities and neighborhoods with their own personalities and benefits. As whole, the state presents more than 11,000 miles of lakes, rivers, and waterways for recreation, transportation, and beauty. In addition, no part of the state is very far from the Gulf of Mexico or the Atlantic Ocean. Popular Florida retirement activities include golfing, fishing, diving, snorkeling, boating, hiking, and horseback riding.
Most Popular Florida Retirement Locations
Every year thousands of retirees are attracted to cities and towns throughout the state of Florida. The state features prominently on “best of” retirement lists every year. Some of the more popular Florida retirement locations include Palm Beach County, Sarasota, Port Charlotte, Venice, and Key West.
Palm Beach County, Florida
Palm Beach County is one of the most popular retirement destinations across the state of Florida. Affordable housing prices, five senior centers, and 43 beaches and parks attract retirees from all over the United States and the world. In fact, in 2009 Forbes named Palm Beach County as one of the ten best counties in which to grow old. Their selection was based on housing costs and incomes, economic health, medical care, and demographics. Palm Beach County is Florida’s largest county. It is comprised of cities such as West Palm Beach, Boca Raton, Boynton Beach, Delray Beach, and Wellington.
Sarasota is the unofficial cultural capital of Florida. Residents enjoy the Florida West Coast Symphony, Sarasota Music Festival, Sarasota Ballet, Sarasota Opera, and numerous other artistic, theatrical, and musical venues. Historic places and interesting neighborhoods abound. Sarasota is a rapidly growing beach town, so a variety of restaurants, shops, and nightlife are guaranteed. Retirees can choose to live in gated golf communities, Gulf Coast mansions, downtown high-rises, active adult communities, or traditional neighborhoods.
Port Charlotte, Florida
Port Charlotte has been selected by Money Magazine as one of the top 25 places to retire in the United States. Nearly half of the 48,000 residents are over age 50, and since the city sits near both cruising waters and protected shoreline, it is a great location for anyone attracted to the water. Port Charlotte offers affordable housing, top-notch medical facilities, plenty of land-based and water-based recreation, and year-round cultural classes and theatrical productions.
Venice is an attractive Florida retirement destination for anyone who wants to live in a walkable city with a small town feel. Housing is so close to shops, medical offices, beaches, and parks that many residents choose to ride their bikes or walk. Modern developments and gated communities with championship golf courses sit outside the city core. Venetians have direct access to the Gulf of Mexico and its prized boating environment. U.S. News & World Report has selected Venice as a top retirement pick.
Key West, Florida
Key West is the southernmost community in the United States and the only location in the continental U.S. that is frost-free. This island offers a laid-back lifestyle, diverse neighbors, and Caribbean charm. As in Venice, most residents ride their bikes instead of driving cars. Real estate is expensive in Key West, with two- and three-bedroom homes selling for a median price of $375,000. Housing options include luxurious coastal estates, charming Colonial houses, and oceanfront condominiums. Bars, restaurants, shops, and entertainment options are plentiful.
Expected Retirement Savings Needs
One step in the retirement planning process is even more important than selecting the right location. The basis of a comfortable Florida retirement involves estimating and calculating retirement savings needs. Without sufficient funds, retirement can be disappointing and stressful. The amount needed to retire in Florida depends on several factors, including:
- Current age
- Anticipated retirement age
- Life expectancy
- Pre-retirement savings
- Post-retirement expenses
The difference between a person’s current age and anticipated retirement age controls how long savings can accrue. This phase affects how much money must be saved annually and how aggressively investments must perform in order to accomplish retirement goals.
The difference between the retirement age and a person’s life expectancy dictates how long retirement savings must last. Most retirees need to save enough money to last for 20 years. A longer retirement either means setting side more money or leading a scaled-back post-employment life. A shorter retirement period can reduce the amount of money that must be saved, or it can increase the legacy left behind for family members.
Consequently, the pre-retirement savings and post-retirement expenses are critical numbers that directly affect each other. The total amount saved before retirement determines how golden the “golden years” really are.
Estimating the Required Amount of Savings
An old rule of thumb states that individuals need only 70% of their pre-retirement income in order to maintain the same lifestyle after retirement. Unfortunately that rule has become obsolete due to longer life expectancies, higher taxes, and continued consumption and activities. Most people no longer want to finish their lives with austere cutbacks. They want to continue living the lifestyle to which they have grown accustomed–with all of the travel, education, shopping, second homes, recreation, etc. that it brings. To maintain a similar lifestyle after retirement, people now need to possess a retirement income almost as great as their pre-retirement income.
The simple method of estimating savings needs is to use a percentage of current income and adjust for annual inflation. For example, the following scenario applies to Jane, a person currently making $50,000 per year who plans to need only 90% of her current income during retirement. Inflation is estimated at 3% annually.
Adjusted Retirement Income = Current Income X Adjustment Percentage
Adjusted Retirement Income = $50,000 X 0.90 = $45,000
Jane expects to need $45,000 annually during retirement, in today’s dollars.
Due to inflation, that $45,000 in today’s dollars will be worth less each year in the future. To adjust for inflation, multiply the previous year’s needs by the inflation percentages.
Year One Needs: $45,000
Year Two Needs: $45,000 X 1.03 = $46,350
Year Three Needs: $46,350 X 1.03 = $47,740.50
Year Three Needs: $47,740.50 X 1.03 = $49,172.72
Keep in mind that the amount that must be saved for each year supplies a $45,000 lifestyle by today’s standards. Jane must save more than $45,000 for each year of retirement in order to keep up with inflation.
How to Determine Post-Retirement Expenses
How much will be spent is a deciding factor in how much must be saved. Individuals should ask themselves the following questions when estimating post-retirement expenses in Florida.
1. Will you live in a location that is less expensive, more expensive, or about as expensive as your current home? Factor in costs of living such as housing payments, utility bills, taxes, insurance, transportation costs, groceries, shopping, and entertainment.
2. Do you plan to live the same lifestyle, a simpler existence, or a more expensive way of life?
3. Will your medical expenses increase? Consider any diseases that run in your family, even if you have not yet displayed symptoms.
4. How much money would you like to leave behind?
5. Apart from your retirement savings, will you receive additional income during retirement? How much money will you receive from Social Security or pensions? Do you plan to work part-time during retirement?
AARP suggests spending no more than four percent of retirement savings the first year, determining how that budget fits lifestyle needs, and then recalculating the percentage every five years. The goal is to extend the length of a Florida retirement while maintaining adequate funding every year.
Tips for Maximizing Retirement Savings
To maximize retirement funds, individuals should take two courses of action: (1) before retirement, save more for a longer period of time and (2) after retirement, spend less for a shorter period of time. Below are details on how to accomplish these objectives.
- Start saving early and allow compound interest to boost funds. Individuals over 50 can use the IRS’s catchup provisions to add extra money to their nest eggs.
- Maximize contributions to employer-sponsored 401(k) and 403(b) plans, especially when the employer matches a portion of the cash set aside.
- When retirement plan contributions are maxed out, direct excess funds to Roth IRAs. Because the investment is based on post-tax funds, money can be withdrawn tax-free.
- Create a diverse portfolio of stocks, bonds, and mutual funds that matches your risk tolerance and retirement goals. A qualified Florida retirement planner, such as one of the individuals mentioned below, can help you with calculations and strategies.
- Live under-budget today and save the excess money for tomorrow. Tuck away at least a portion of bonuses, gifts, and tax refunds. Remove unnecessary expenses by cooking at home more often, opening a Netflix account instead of paying for movie theater tickets, and cancelling a landline in favor of using a mobile phone instead.
- Reduce expenses by seeking out early bird savings, retiree discounts, last-minute travel fares, off-peak hotel rates, and retailer sales. Take advantage of coupons and special offers.
- Before or after retirement, increase income by working a part-time job, starting a business, or investing in rental property.
- Retire later so savings can accumulate for longer timeframe and are needed for a shorter period.
- Save extra to compensate for family emergencies that may cause you to dip into retirement savings.
- Be debt-free at retirement. Eliminate all credit card bills, mortgage payments, and auto loans before retirement so you are not still paying for them while on a limited budget.
- Retire to a less expensive city. Downsize to a smaller residence with lower maintenance expenses, such as a condo or senior living center.
- Spend immediately taxable money such as cash savings accounts before dipping into money that is only taxable upon withdrawal.
- Avoid investments and accounts with high fees. Look for investments with low expense ratios and trading fees and free checking accounts that do not charge for ATM withdrawals. Avoid overdraft fees either by balancing accounts or purchasing overdraft protection.
Retirement Planners Serving Florida
The best way to plan for a Florida retirement is to speak with a qualified financial planner. This person can compare investment risks and rewards, discuss tax consequences, and develop strategies for long-term savings and an extended retirement. Florida retirement planners are trained and experienced in navigating complex laws and fashioning customized financial plans based on the retiree’s family circumstances, age, health, life expectancy, pensions, savings, risk tolerance, legacy goals, and market conditions.
When choosing a retirement planner, consumers should consider such factors as:
- Does this person represent a specific company and specific funds, or will you have access to multiple retirement investments?
- Is this person trained in portfolio and investment analysis?
- Is this individual easy to reach when you have questions or need advice?
- Do you trust this retirement planner to provide recommendations that match your goals and risk tolerance? Will he/she always work toward your best interests?
- Is this person able to help with estate-planning needs, whether personally or through a professional connection?
Listed below are a few of the financial and retirement planners throughout Florida. More advisors may be located closer to your retirement destination.
Allgen Financial Services
301 E. Pine Street, Ste 150
Orlando, FL 32801-1012
4296 Bee Ridge Road
Sarasota, FL 34233
6767 N Wickham Road, Ste 400
Melbourne, FL 32934
Morgan Stanley Smith Barney
4855 Technology Way, Ste 600
Boca Raton, FL 33431
2655 LeJeune Road, Ste 909
Coral Gables, FL 33134
Raymond James Financial Services
175 Southwest 7th Street, Ste 1900
Miami, FL 33130