Retirement is about more than playing golf during the week and visiting the grandkids over the weekend. It is an opportunity to enjoy life without the demands of a full-time job. Unfortunately too many people fail to plan for retirement and end up working into their 70s, scrimping to pay bills, and leaving nothing behind—no notion of happiness in the best years of their lives, no legacy for their children.
The information below simplifies retirement planning and provides options for people in their 20s to 60s. It looks at the secret retirement destination of New Mexico, how to calculate retirement needs, tips for saving more money now, and ways to extend the retirement years.
Why Retire in New Mexico
New Mexico is often overlooked as a retirement destination. Its more identifiable neighbors of Arizona, Colorado, and Texas garner all the attention, and the sparse population density only adds to the lack of recognition. The good news is the low competition may make New Mexico a gem for the retirees who notice it. The higher altitude produces milder winters and cooler summers, while the mountains provide plenty of beautiful scenery and recreation. In addition, small(er) town living means lower real estate prices as a bonus for the state’s low tax rate.
Weather and Climate
New Mexico’s diverse geography brings different weather patterns to each part of the state. It sits at the southern end of the Continental Divide, with mountains in the north, desert in the south, and plains to the east. The state is not a place for beach lovers, but almost everyone else is certain to find a location that is agreeable. Most days are sunny with low humidity, little moisture, and pleasant weather. Some parts of the state experience wide temperature variations of up to 50 degrees in a single day, so no day is typical. In the hottest month of July, desert temperatures generally reach the 90s and high elevations see highs in the upper 70s. The coldest month of January sees highs in the mid-50s for the southern and central valleys and highs in the mid-30s for the northern mountains.
Tax and Government
According to the Tax Foundation, New Mexico’s state and local tax burden of 8.6% is one of the lowest in the nation, falling over 1% below the average. The New Mexico state income tax varies from 5.3% for the highest tax bracket to 1.7% for the lowest bracket. Sales tax ranges from 5.1% to 8.7% when state, county, and local taxes are combined. Property taxes fall below the American average, and residents age 65 or older receive a property tax rebate. With regard to politics, New Mexico is a swing state. Residents have supported both Democratic and Republican candidates through different period of history.
Demographics
New Mexico houses nearly two million people, with about half claiming Hispanic or Native American heritage. About a quarter of the population lives in Albuquerque, the state’s largest city. Other large cities include Las Cruces, Rio Rancho, and Santa Fe, which are also some of the state’s most popular retirement locations.
Popular New Mexico Retirement Locations
Three of the most popular retirement locations in New Mexico are Albuquerque, Las Cruces, and Santa Fe. Details about the cities are below.
Albuquerque, New Mexico
In 2006, CNN and Money Magazine selected Albuquerque as one of the best places to retire. This city is the state’s most populated, and nearly a quarter of the population is over 50 years old. At the time of the survey, Albuquerque’s senior population had been growing at 19% per year and 68% of seniors had moved into the state. The metro area boasts 14 golf courses, 3 museums, 4 colleges, and plenty of restaurants and entertainment facilities. In addition, Albuquerque protects its 505,000 citizens with 54 hospitals and clinics, including a VA hospital, a major heart hospital, and a research hospital associated with the University of New Mexico. With a summer high of 92 degrees and a winter low of 23 degrees, the city’s residents enjoy four seasons of weather and drier desert air.
Las Cruces, New Mexico
With low taxes, sun 330 days per year, and plenty of activities, Las Cruces is one of the top retirement cities in New Mexico. In fact, in both 2010 and 2006, AARP The Magazine selected this picturesque city as one of the United States’ “dream towns” for seniors. It sits near south-central New Mexico, about 42 miles from El Paso, Texas. Situated at the foot of the Organ Mountains, Las Cruces keeps its residents busy with hiking, camping, and golfing, as well as sports, music, and theater. Even though it is the state’s second largest city, Las Cruces is often described as having a relaxed, small town feel. It also offers a financial bonus. Residents aged 65 and older may be exempt up to $16,000 in taxes from income sources under $51,000, and residents over 100 pay no taxes at all.
Santa Fe, New Mexico
Santa Fe is New Mexico’s capital, the fourth largest city, and an excellent retirement destination. Not only has U.S. News recognized the city as one of the nation’s best places to retire, but it also placed Santa Fe in the top ten best cities for singles over 65. Even though the city is home to only 67,000 people, it attracts approximately one million tourists annually. Just like those visitors, residents can take advantage of the area’s top-notch art galleries, Spanish-Pueblo architecture, historic buildings, golf courses, hiking and horseback riding trails, and snow trails. Crime rates are low, but finding affordable housing can be an issue due to the high home prices. For accidents, illnesses, and injuries, Santa Fe County has six hospitals. This list includes St. Vincent Regional Medical Center, which is the only level III trauma center in the northern part of the state.
Calculating Retirement Needs
After choosing a retirement destination like New Mexico, the next step is to calculate the amount of money needed to live comfortably. New Mexico retirement planning takes into consideration both the savings period and the retirement period.
The Savings Period
The years before retirement can be considered the savings period. The amount of money gained during this period—whether through direct funding, interest payments, appreciation, or tax savings—determines the total that can be spent during retirement. The major factors are age, expenses, and income.
Age: How old are you now? How old will you be when you retire? Starting to save early in life and retiring as late as possible will extend the income level in retirement.
Expenses: How much do you spend annually now, including all housing expenses, utilities, car payments, groceries, shopping, and entertainment? How much do you expect to spend annually after you retire? Do you plan to live the same type of lifestyle, cut back, or live it up? A scaled-down retirement equates to 75% or more of your pre-retirement income. Keep in mind that inflation means the money you earn today will be able to buy less tomorrow. Factoring in an additional padding of 3% per year should cover inflation.
Income: How much post-tax retirement income will you derive from Social Security payments and pensions? This amount will offset your expenses. If your retirement income exceeds your expenses, you do not need to save any additional money. If your expenses will be higher than your income, you will need a nest egg.
Saving Tips for a New Mexico Retirement
The following tips will maximize your savings for a New Mexico retirement:
- Start saving early. If you have not already started, start now, and if you are over 50, take advantage of the IRS’s catchup provisions. Let the power of compound interest reduce your required effort.
- Participate in employer matching programs. Take the free money and stuff it into your nest egg.
- After maximizing contributions to a 401(k) or 403(b) plan, turn to a Roth IRA. The money invested in a Roth IRA is post-tax, so withdrawals during your New Mexico retirement are tax-free.
- Invest in stocks, bonds, and mutual funds with a proven performance history. Perform your own research or ask for advice from a trusted professional.
- Lower your cost of living and direct the savings into retirement funds. Options include moving to a less expensive city or replacing a costly house with a cheaper alternative.
- Boost your income with a second job, and tuck the extra into retirement savings.
- Pay off debt. The interest rates on credit cards, mortgages, and car loans are often higher than the rates gained through saving. Pay off draining debt first in order to free up money for retirement savings.
The Retirement Period
The next stage is the retirement period, which starts when full-time work stops. Retirees who are concerned about having enough money during the retirement period should consider working longer, taking on a part-time job, renting out rooms, and other strategies. Many of the considerations for the savings period also apply to the retirement period. The two highlighted here are age and withdrawals.
Age: How old will you be when you retire? How long do you expect to live? The longer you live, the more money you will need. Most retirees need income for at least 20 years.
Withdrawals: How much money will you be taking out each year? AARP suggests withdrawing no more than four percent of your retirement savings the first year. They warn that higher withdrawal amounts could deplete your nest egg sooner than expected. The percentage should be reevaluated every five years to determine whether you can take out more or need to adjust your budget.
Tips to Lengthen a New Mexico Retirement
Follow the ten methods below, and reward yourself with a longer retirement in New Mexico:
- Downsize to a less expensive home in a less expensive city that is still comfortable and meets your needs. Not only will you reduce any mortgage payments that are still outstanding, you will also decrease insurance payments, utility bills, and maintenance expenses. Many retirees choose to live in condos, where the condo association takes care of general upkeep.
- Reduce transportation expenses. Downgrade to a less expensive automobile or, if you retire in Albuquerque, go car-less altogether. Use public transportation to cut down insurance and maintenance bills.
- Spend non-retirement money first. Most retirement accounts are not taxable until the money is withdrawn, whereas tax must be paid on the gains from general savings accounts and investments each year.
- Stagger investments so that they produce income over different time periods. For example, one set could contain cash, CDs, and annuities to use during the first five years of retirement. Another set could consist of short-term bonds for the next five years. Investments intended for 20 years out could consist of more aggressive stocks.
- Limit the annual tax burden by spreading retirement distributions across several years.
- Reduce the fees and expense ratios chipping away at retirement savings. Also avoid trading fees, ATM fees, and overdraft charges.
- Use all available discounts. Save money with senior discounts, early bird dining discounts, and AARP discounts. Travel during off-peak times and take advantage of last-minute deals.
- Limit the extras. Cancel cable TV and switch to free online shows or a monthly Netflix membership. Use a mobile phone only instead of paying for both a mobile phone and a landline. Do not take up any expensive new hobbies. Cook at home more often.
- Bargain shop. Negotiate the best prices, clip coupons, wait for sales, and buy used items. Join free programs such as book and movie lending from libraries.
- Be debt-free. Paying off your debt before retirement means that all of your available (limited) income can be applied to any expenses that pop up.
New Mexico Retirement Planners
Retirement can be a complex and stressful subject. The best path for each person often depends on factors such as age, life expectancy, health, family circumstances, legacy goals, savings, pensions, risk tolerance, and market conditions. Having a financial plan—and following it—is critical to enjoying the golden years without worry. New Mexico retirement planners are trained to provide advice and support with your retirement savings, estate planning, and tax management needs.
Below is a list of a few of the retirement planners serving the state of New Mexico:
A G Edwards & Sons Inc
210 Montezuma Ave Ste 100
Santa Fe, NM
(505) 983-8699
Edward Jones
1717 E University Ave
Las Cruces, NM 88001
(575) 532-2015
Steve Lynch Wealth Management
6605 Uptown Blvd NE #290
Albuquerque, NM
(505) 881-7526