Retirees are often stereotyped into one bunch, but retirement has a different meaning for each individual. For some, retirement is an opportunity to relax after years of arduous work. They look forward to the occasional round of golf, having coffee with friends, and playing games with the grandchildren. For others, retirement brings a chance to work even harder—to volunteer for a charity, travel to all the places missed during work years, and become an advocate for the ideas that mean the most.
Whatever this new beginning brings, the tips below simplify the Massachusetts retirement planning process. They teach how to enjoy an extended, worry-free retirement through estimating and saving the money needed and using certain methods to retire earlier and longer.
Why Retire in Massachusetts
U.S. News, Money Magazine, and a number of other publications have selected Massachusetts as a wonderful retirement destination. Retirees have their pick of quaint countryside villages, vibrant cities, and coastal beach communities. While housing costs and taxes are high, healthcare services are excellent and recreational opportunities are plentiful. Popular activities include sailing, yachting, whale watching, fishing, hunting, and skiing. Active adults can also hike one of Massachusetts’ long-distance trails, such as the Appalachian Trail, the New England National Scenic Trail, the Metacomet-Monadnock Trail, the Midstate Trail, or the Bay Circuit Trail. The information below reveals more details about this popular retirement destination.
Weather and Climate
Massachusetts sees four distinct seasons, with nor’easters and frequent snowstorms in the winter. Cities along Cape Cod enjoy more moderate weather, while the rural western Massachusetts has a more severe climate. Temperatures range from an average high of 82 degrees in the summer to an average low of 16 degrees in the winter. Massachusetts is famous for its bright and colorful Fall foliage.
Tax and Government
Massachusetts has been known for a high tax burden, but the state has taken strides to reduce the financial impact to residents. The state has a flat income tax of 5.3%. The state and local tax burden amounts to 9.5%, which is slightly below the national average. State sales tax is 6.25% plus any taxes imposed by county and local jurisdictions. With regard to political issues, the state has legalized gay marriage and decriminalized possession of small amounts of marijuana. Massachusetts tends to vote for liberal Democratic candidates.
Demographics
Over 6.5 million people live in Massachusetts, and it is one of the most densely populated states in the U.S. The majority of residents live in the Greater Boston area. The state’s population continues to grow, albeit more slowly than states in the South and West, due to immigration from Central and South America.
Popular Massachusetts Retirement Locations
Four of the most popular retirement locations in Massachusetts are Barnstable Town, Boston, Brockton, and Cambridge. Descriptions of each city are listed below.
Barnstable Town, Massachusetts
With 50,000 residents, Barnstable Town is the largest community on Cape Cod. It is a combination of seven villages, of which Hyannis holds the central business district. The Town of Barnstable is also a U.S. News top pick for best retirement places and the number one pick from CNN Money for Massachusetts retirement destinations. In fact, about one third of the population is over 55. Retirees can enjoy activities that are typical of coastal New England—fishing, sailing, and relaxing on the beach. The town is also only a ferry ride away from Nantucket and Martha’s Vineyard.
Boston, Massachusetts
Boston is the capital of Massachusetts and a great retirement destination for active adults. Retirees who choose to live along with the 500,000 other people downtown will find a safe, walkable, and vibrant city. Some of the perks of living in Boston are the many restaurants, shopping centers, parks, sports events, theatre and cultural attractions, and plenty of history inside and outside of the museums. Even retirees who decide to live in the general metro area—with its 4.4 million residents—can zip downtown in minutes thanks to the mass transit system. Boston retirees can take advantage of top-notch medical care at the Dana-Farber Cancer Institute, Harvard Medical School, Massachusetts General Hospital, and many other hospitals, clinics, and medical offices. Boston College even has a Center for Retirement Research to enhance access to information on retirement issues. Boston’s weather includes four distinct seasons with warm summers and cold winters.
Brockton, Massachusetts
A third option for retirement in Massachusetts is the city of Brockton. U.S. News has named this city of 94,000 a top pick for retirees. It offers plenty of recreational opportunities, including Salisbury River Plain, Snow Park, Hillstrom Farm, Brockton country club, Wedgewood country club, and Thorney Lea country club. Brockton is served by three hospitals: Signature Healthcare Brockton Hospital, Caritas Good Samaritan Hospital, and Brockton Veterans Administration Hospital. Brockton is located between Boston and Providence, Rhode Island.
Cambridge, Massachusetts
Just across the Charles River from Boston, Cambridge is an excellent retirement destination for anyone who loves to learn. Harvard University offers free lectures, workshops, and exhibitions, and the Cambridge Arts Council displays artwork throughout the city. Shoppers can take advantage of the bookstores and shops in Harvard Square or the international flair of Inman Square. Central Square is also a good place to listen to live bands. Over 20% of Cambridge’s population is over 55, so retirees enjoy comprehensive healthcare from the area’s hospitals, clinics, and medical offices. While housing prices are high, retirees can still find some deals in single-family homes, condos, and retirement communities. Seniors 65 or older can get a 15% discount on water and sewer charges from the city.
Calculating Retirement Needs
Even more important than choosing a retirement destination is the monetary calculation for Massachusetts retirement planning. With a proper estimate, the savings period and retirement period will both be wasted.
The Savings Period
The savings period is the crucial time before retirement in which money is tucked away. It is also a period of deciding what a comfortable, realistic retirement will look like and what needs to take place to make that scenario come true. The main factors used in savings calculation are age, expenses, and income.
Age: The difference between your current age and your retirement age gives you the number of years in which savings can be accumulated. Saving early maximizes how much compound interest will accumulate. Alternatively retiring later accomplishes the same goal.
Expenses: The expenses you will have during retirement are another key determinant for how much money must be saved beforehand and how long that money will last. First, you must decide whether you will be retaining your current lifestyle, cutting back, or increasing the level of luxury. Then open a notebook or spreadsheet and list your current bills. This list should include all housing expenses, utilities, automobile payments, groceries, shopping, and entertainment costs. What will these expense categories look like during retirement? If you are scaling back, you can estimate your expenses at 75% or more of your current income, but a more accurate list will present you with a more realistic scenario. Finally, add 3% per retirement year to cover inflation.
Income: In addition to the savings period length and retirement expense levels, income is another key factor. Determine the amount of employment income, Social Security income, and pension income you will receive during retirement. Subtract the estimate of your monthly expenses, and the remainder is the minimum amount that must be saved. Income can be increased through working more years, working multiple jobs, holding property and investments that appreciate in value, and spending less than budgeted in order to save the difference.
Saving Tips for a Massachusetts Retirement
The following tips give you a starting place for boosting your savings and creating a more enjoyable Massachusetts retirement. Save early, save often, and save more.
- Saving can be hard work. Limit your effort by saving early and letting compound interest and asset appreciation do most of the work for you. If you are over 50 years old, you can use the IRS’s catchup provisions to stash away extra money that you missed in previous years.
- Maximize contributions to 401(k) and 403(b) plans, especially if the employer matches a portion of the principal. The free money will help your savings accounts to grow rapidly.
- After the contributions to employer-sponsored plans are maxed out, direct extra money to a Roth IRA. Because the investment is made with post-tax money, withdrawals are tax-free.
- Choose investments that match your risk tolerance and have a positive performance history. Diversify your portfolio with stocks, bonds, and mutual funds. If you have questions or would like advice, contact one of the Massachusetts retirement planning professionals listed in this article.
- Live under-budget today for extra money tomorrow. Lower your cost of living, and use the savings to strengthen your retirement accounts. Consider moving away from expensive cities and expensive houses, and seek out a simpler, less costly life instead.
- Make extra money and use it to pay down debt and add to your retirement accounts. Options include working another job, opening a business, or becoming a landlord.
- Plan to be debt-free. Paying off extra expenses now will give you extra money for the retirement years.
The Retirement Period
The retirement phase is the next crucial time after the savings period. Retirement removes the stress of full-time work and opens up the opportunities for enjoying life. Retirees who believe they may not have enough money during retirement should consider working longer, taking on a part-time job, or renting out rooms. Two important factors for the retirement period are age and withdrawals.
Age: How long will your retirement last? Most retirees need income for at least 20 years, and enough money must be saved to last that entire period. To determine your retirement period, subtract your retirement age from your life expectancy.
Withdrawals: As with the savings period calculations, create a list of your annual expenses. How much money will you need to withdraw from your investments and savings accounts in order to pay the bills? As suggested by AARP, avoid depleting your retirement accounts too early by taking out no more than four percent the first year. Reevaluate the percentage every five years so you continue to have enough money to meet your day-to-day needs and to last your entire retirement.
Tips to Lengthen a Massachusetts Retirement
What good is Massachusetts retirement planning if retirement is cut too short? Use the advice below to maximize both how long you can enjoy yourself and your level of enjoyment.
- Lower your daily living expenses. Consider retiring in a less expensive city and buying a less expensive home. When comparing locations, factor in housing costs, insurance, utilities, cost of living, taxes, and other expenses. If you dislike external maintenance and yard work, look into condos and senior housing associations.
- Reduce transportation expenses. Downgrade to a less expensive, paid-off automobile or, if you live in the Boston metropolitan area, use public transportation to go car-less altogether.
- Spend taxable money first. The gains from cash savings and investments are taxable, whereas most retirement accounts are not taxable until the money is withdrawn.
- Stagger investments so they produce income across several defined periods. As an example, the first five years of retirement could be funded through cash, CDs, and annuities. Short-term bonds could support the next five years, and more aggressive stocks could provide cash flow for 20 years out. Spread distributions across multiple years to reduce the annual tax burden.
- Avoid high expense ratios and fees that chip away at your money. Look for investments with low charges and trading fees, use only ATMs that do not charge fees, and balance your accounts to avoid overdraft charges.
- Save money by using all available senior discounts, early bird dining discounts, and AARP discounts. Reduce travel costs by booking off-peak travel and searching for last-minute deals.
- Limit unnecessary expenses. For example, replace cable TV with a monthly Netflix membership or free online shows from the major television networks. Instead of paying for both a landline and mobile phone, cancel your landline and use your mobile phone for all calls. You can also make an effort to eat at home more often than in restaurants. Do not take up any expensive new hobbies.
- Bargain shopping is an excellent way to extend retirement. Negotiate the best prices, wait for sales, and use coupons. Take advantage of free and discounted products from eBay, Craigslist, used clothing stores, community sales, and public libraries.
- Eliminate your debt before you retire. Use your retirement as a way to start fresh, instead of paying off your old working life.
Massachusetts Retirement Planning Professionals
Retirement is a complex subject, and very few retirees are able to navigate effectively through all of the tax implications, estate planning guidelines, and financial strategies. Instead of making unnecessary costly mistakes, consult a professional. Massachusetts retirement planners have the training and experience to create custom financial plans based on the retiree’s age, life expectancy, savings, pensions, health, family circumstances, legacy goals, risk tolerance, and market conditions.
Numerous retirement planners serve the state of Massachusetts. Contact one of the professionals below or find another advisor in your area.
Charles Schwab
127 Congress Street, Floor 01
Boston, MA 02110-2511
(617) 210-7400
Dietz & Lynch Capital
37 1/2 Forrester Street
Newburyport, MA 01950
(978) 225-8386
Fisher Financial Strategies
245 First Street, Suite 1800
Cambridge, MA 02142
(617) 444-8555
Moors & Cabot Investments
One Financial Plaza
1350 Main Street, Suite 1510
Springfield, MA 01103
(413) 733-5232
Todd Pfleger Financial Services
1 Financial Place
297 North Street, Suite 321A
Hyannis, MA 02601
(508) 771-0667