Michigan Retirement Planning

Michigan stands in the twenty second position for land area among all the states. Approximately 41% area within the state borders is covered with fresh water from the bordering Great Lakes that include Lake Michigan on the west, Lake Huron on the east, Lake Superior that surrounds the Upper Peninsula, and a short border with Lake Erie to the southeast. Life in Michigan includes summers spent with friends and family “at the lake” which can mean an inland lake or a shore property facing one of the Great Lakes. When the outset of the retirement years arrives, the primary residence is sold and winters are spent in a southern state. Florida is highly ranked as a retirement winter destination for retirees who have lived and worked in Michigan, but they will return to Michigan for the moderate summers at the lakeshore. Because of the extreme climate in Michigan, most hard working natives work in the lower half of the state and recreate in the northern shore areas. When the job no longer keeps them stationary, they fly south as snowbirds for the winter months. Few Michigan natives will completely leave the state because of the ties to friends and family. Many intricacies must be considered when writing the retirement plan. Multiple residential properties will be a drain on the financial budget of a Michigander in retirement.

Strategies and Tips for Saving

Saving for a retirement involving more than one residence will increase the savings goals above most standard plans. Strategy is key to releasing the homestead property at the right point prior to retirement so that a home in a southern climate or a recreational vehicle can be purchased. Tax obligations in more than one state will be very common and must be factored into the Michigander’s retirement plan. Each of these nuances must be actively planned into the retirement strategy.

Trusted Financial Retirement Planner

Throughout the working years, a professional association with a reputable financial advisor will guide the execution of active savings efforts. Most people will rely on a referral from a trusted friend, but thorough research can lead to an advisor who has developed multiple financial plans for people in various walks of life. While this person may not know the answers to all of your questions immediately, he should demonstrate an active interest in finding your answers. If issues are never addressed and answers are not sought, find another advisor early in the working years.

Monetary Income Sources

Sources of income will shift from a salary and benefits during the years of full-time employment to a combination that includes a pension check, Social Security payouts, and monthly draws from savings and investments. The retirement plan must list every source of possible income to reveal the savings levels that must be sustained to finance the desired retirement lifestyle. If the home will be sold as a source of retirement income, the sale must be documented to reveal the shift from equity to cash for the purchase of a retirement house. Whenever an inheritance is anticipated, notes must be included, but decisions cannot be made until the inherited money is actually received.

Retirement Living Budget

The retirement budget is more fluid than a standard budget because of the life changes that happen more often. One health change can signal a complete revision of the budget to extend the use of funds for longer periods. Travel expenses will increase for the snowbird and must be budgeted accurately. Additional expense will be realized for taxes in the two states of residence. Allowing too much money in one or more categories is better than underestimating the needs during the retirement years. Housing decisions must be made while the health of both spouses is good, but a plan must be written for the years when an annual flight south is no longer possible.

Avoid Financial Scams

Whenever the retiree is approached for money or personal information, the contact should be terminated immediately. Then the financial advisor and one trusted relative must be contacted for assurance that the decision was correct. All financial decisions must be preceded by conversations with more than one person to ensure that savings is not lost on false opportunities. Evaluate every decision as though the other person is trying to gain something at your expense.

Calculating Expected Savings Needed

The first common step in estimating the amount of money required for retirement is to input some basic non-personal information into an online retirement calculator. Using the current income and age along with the desired monthly retirement income and a standard return on savings percentage, the calculator will return a lump sum estimate for the required nest egg. The next step is to start saving each month and year in pursuit of the goal.

Once the total saving goal is set, other notes must be made to address the situations that the calculator overlooks. Within the retirement plan, there must be notes that reveal the various life events that have been anticipated and how they will be addressed. Most plans do not accurately reflect the changes in the monthly amount of a Social Security check. Standard percentages to project growth in savings are rarely accurate because of market changes that will increase or decrease the rate of growth over time. If growth in savings is overestimated, the retirement date must be postponed. Separate retirement plans must be made for each spouse to provide for each person after the death of the other one. No one can anticipate which spouse will live longer, and the plan must reveal shortcomings if one pension income is lost. Housing plans must reflect the impact of a long term stay in a nursing home for one or both spouses. Increases in the costs of food, transportation, and utilities can strain the budget if not included in the plan. As the purchase power of the dollar decreases over the decades, the budget must include higher amounts.

Long term savings plans are difficult to follow through the course of life events that occur during the working years. As jobs are lost, health changes occur, children grow up, and geographic moves are made, the retirement plan must evolve. Whenever income decreases, the savings plan must be adjusted until increases are realized. A static savings plan will be cast aside and progress will be lost if adjustments are forbidden. Use of a retirement worksheet can document changes that have happened, and the possible methods for regaining the lost ground will encourage the future retire to stay the course. Two worksheets must be included in each retirement plan. One worksheet for each spouse with all the notes associated with the current and future plans if the spouse passes away. When one person’s health or job undergoes changes, the other plan can remain on track. Assuming both people will live an equal period of time makes one plan very limiting. Annual retirement plan reviews prevent surprises.

Two locations during retirement add a dimension to the plan that will require active use of the factors on the COLI index. Savings totals will be more accurately set when the buying power of the dollar is included in the plan. Certain regions of the country enjoy lower costs of fuel during different seasons, and for the snowbird the higher prices will be paid in both locations because of the seasonal demands. Maintain a long term worksheet of the costs associated with living in both states and be open to changing the plan if one index jumps and remains high over time.

Why People Retire in Michigan

While the size of the state of Michigan is small in comparison to the very large western states, there are 3177 miles of shoreline surrounding the Upper and Lower Peninsulas. Only the state of Alaska has more shoreline. There is plenty of room for innumerable retirement homes that have lake shore property. Many of the people in Michigan have had the same lakeshore home for decades and will retain the property through the retirement years. The property will be included in the inheritance plans to keep the property in the family. Such familiarity is one of the many reasons that retirees in Michigan have a unique approach to retirement living.

Home

Generations of Dutch immigrants have lived in Michigan and are a tightly knit community of every age group. When retirement arrives, the family knows that the oldest generation will spend the cold months in warmer states and be home for the summer months at the lake. Few cities are chosen as retirement locations until physical health requires daily assistance.

Climate

Michigan is famous for brutal winters where lake-effect snow is measured in feet. Most people do not realize the beauty of Michigan summers where produce is abundant from the early berry season to the richness of fall harvest that is vast and plentiful. Summer heat is dealt with by spending time on the many inland lakes or on the shores of the Great Lakes. The Upper Peninsula is 90% forested, but there are private homes where people will spend summers enjoying the unmatched beauty just across the lake from Canada.

Tourism

Canadians enjoy visits to Michigan year around. Many people from other states also visit Michigan for the rich history of the automobile industry. The city of Battle Creek also draws thousands of visitors every year because the breakfast cereal giants offer tours of their production facilities. For people who love the outdoors and especially water adventures, a trip across the Mackinac Bridge is a must. Retirees will invite friends and family to spend extended times at the lake home during the warmest times of the year.

Healthcare

While the majority of Michigan’s population is nestled in the lower third of the Lower Peninsula, there are health facilities in each quadrant of the state. Medical networks are managed to ensure transport of any patient needing additional care.

Skewed Cost of Living

Michigan falls into the 11th slot on the index that measures living costs in each state. An index value of 93.01 does not reveal that most of Michigan’s categories come in well above the national average of 100.

Housing

Michigan’s least expensive category is housing with a score of 81.73.

General goods and services

Another low score for Michigan is the 92.21 index value for basic needs like food and clothing.

Transportation

Closer to the national average, Michigan’s transportation index is 103.35.
Utilities – By far the highest value, the utility index is 110.58 which is caused by the winter demand for various heating fuels.

Affordable Taxes

Michigan assesses a flat 6% state income tax rate on everything except for prescription medications which are exempt. Fuels for home heating are taxed at a rate of 4%.

Gasoline tax equals 25 cents applied to each gallon.

Diesel fuel carries a per gallon tax of 31.9 cents.

Income taxes in Michigan are a flat 4.35% of the federal adjusted gross income. Certain Michigan cities also assess income taxes on their residents. Starting on October 1, 2001, the state income tax rate will decrease 0.1% per year until the rate reaches 3.95%. After October 1, 2015 the rate will be 3.9%.

The median household income in the state of Michigan is $44,905. Per capita income is $36,751 with a tax burden (state and local) of $3,965 (10.8%).

Retiree taxes are lowered by large exemptions depending on the source of the retirement income. Private pension income below $45,120 (single) or $90,240 (married) is exempt. All Federal and State pension income is entirely exempt from state taxes. Income from certain other state pension plans are also exempt.

Property Taxes

Michigan assesses tax on 50% of the actual cash value of the property. Certain seniors are given the option to delay payment of property taxes depending on income and county of residence.

There are no inheritance or estate taxes assessed in the state of Michigan.

Most Popular Michigan Retirement Locations

Only two actual cities rate among the “Top 100” lists that are produced across the country at various times of the year.

Traverse City

Located in the northwest bend of the Lower Peninsula on Lake Michigan, Traverse City is a beautiful location with a rich history. A teeming city during the summer, most people will venture back to the southern cities every Monday morning or in the fall to return to jobs. Traverse City has a rich nautical history and boasts relatively calm waters for even novice boaters.

Ann Arbor

Located just forty miles west of Detroit, Ann Arbor is home to the University of Michigan and listed as one of the most appealing places to retire. With a more stable economy than Detroit, Ann Arbor has become a haven for people who work in industries outside of the auto mobile industry. Crime rates are lower in Ann Arbor and for those who love to live in Michigan, this moderately sized city is the best final destination.

Snowbirds

This term was penned for those people who migrate to Southern states when the snow flies. Many of Michigan’s snowbirds actually own two homes instead of relying on a recreational vehicle. Both methods are common because of the ease of leaving the state prior to the first consequential snowfall each year. Lifelong friends will travel together and live in close proximity in both locations.

Shoreline

Love for the water will keep most Michiganders close to home during the beautiful summers. The cool breezes make the very warm summers of Michigan tolerable for the outdoor enthusiast. Roads that line the shore of all the lakes are maintained for easy access to private property. Whole communities have been built around the summer migration patterns of these northern natives.

Michigan Retirement Planners

The unique needs of Michigan retirees will demand the care and attention of an experienced and reputable financial planner. Ask friends and seek numerous referrals and then interview each as though your retirement plan depends on excellent advice. There are some very fine retirement planners who can design a plan that meets every need.

Richard Coffinger Investments — Kalamazoo, Michigan
7127 S. Westnedge Ave., #5D
Portage, MI 49002
Phone: (269) 327-5250
E-mail: rcoffinger@usa-fs.com
Website: www.richardcoffinger.com

Pohl & Associates — Lansing, Michigan
4710 West Saginaw, Suite 5
Lansing, Michigan 48917
Phone: (517) 323-4807
Website: www.pohlandassociates.com

Retirement Wealth Advisors — Brighton, Michigan
9434 Maltby Road
Brighton, MI 48116
Phone: 810-227-2557
Website: retirementwealthadvisors.com

Conclusion

Michigan may not be the only state where snowbirds spend part of the year, but it is definitely the most mobile of all retirement groups. Because of the long term practice of two residential properties, most of the retirees adapt extremely well to changes in location and climate. Friendships in Michigan are valued as much as family ties, and most Michigan natives will retain close relationships throughout the retirement years. Having family members provide the necessary assistance as each person ages will give a sense of stability that harkens back to the nineteenth century when families never parted.