In the fall of 2019, if things go according to plan, we’ll be down to $4,900 in monthly expenses. After we fold our work retirement accounts and Roth IRA into a dividend-growth style portfolio, as well as increase our side hustling (freelance financial writing), we’ll still only be generating about $3,900 in passive + side hustle income. Not too shabby, but this would mean we’d have to work at least another year (probably two, for safety) before we can cover $4,900 in expenses.
That $4,900 in expenses is largely made up of housing costs ($2,800). Those housing costs are based on living in the DC ‘burbs of Northern Virginia. We don’t have family in Northern Virginia, nor will we have children with roots there (our oldest will be 5). As such, if we’re slated for retirement, then simply moving to a lower cost locale should drastically cut those housing costs and enable us to retire right then, rather than wait.
The numbers are just too compelling to make a case for staying:
|Option 1: Refi NoVA Home and Continue Living in NoVA|
|Option 2: Refi NoVA Home, Rent NoVA Home, and Move|
As you can see, we’ll refinance our home in either case (we are strongly in favor of mortgage debt). However, because property taxes and home prices are so high in NoVA, moving to a better cost-of-living area makes too much sense. There is a third option: to just sell our home, take what we expect to be about $170k in equity and just buy another home, but we’d rather maintain a stream of rental income from that home.
Okay, so that’s the preface of the article. Here’s the meat. Where do we move to? The world is our oyster, essentially, and judging by our recent “let’s live in Manhattan for a year” itch, we are very open to just going somewhere. So, this summer, the family and I plan on taking a plane/roadie hybrid vacation to explore a half dozen or so candidates for where we’ll move to in 2019. We very much want this next place to be the place where we raise our kids all the way through college. We have dreams of all the children having the same doctor for their adolescent years, going to “town” on weekends, visiting the “market,” knowing the teachers and other parents, running for city council, and your basic “white picket fence” lifestyle (just without the whole “job” thing).
So, what are the finalists? At first, we figured we’d just visit every spot mentioned in Johnny Cash’s “I’ve Been Everywhere,” but thought that might get expensive. So, we developed a methodology.
Using Zillow’s database of every zip code in America, this is how we narrowed down the potential candidates to visit (the % is the weight given to that factor):
Median Home Price (60%)
There’s just no need to have a ton of money tied up in a house. Our home today (market value of about $490k) allows us to live in a great house that is close to our jobs. But, bottom line, our same home in other zip codes of the country would cost one-third of what it costs in NoVA. Why overpay for a location when one location is no better than another in most cases?
WalletHub ranks each state by the tax burden on taxpayers. Between sales, property and income tax, we want a state that isn’t prohibitively expensive from a tax standpoint. This isn’t a huge concern, so we’ve only ruled out the worst third of the states.
This is the BLS number that ranks the states by cost-of-living. This number is pretty highly correlated with Median Home Prices, so this metric alone was not too binding.
Rent Ratio (5%)
We plan on trying to be landlords in our next phase of life. Therefore, we’d like to see a strong rental market. We didn’t screen out potentials on this metric, though.
With those elements in mind, we developed a composite number ranking every zip code in the nation.
Lifestyle Considerations: We also ruled out, for our own rankings, a few states based on location. We want to live in a warm(ish) climate. So, we sort of cut out states that resided above the Mason-Dixon line. We also ruled out the gulf coast states. Arkansas, Alabama, Louisiana and Mississippi ranked 45th, 46th, 49th, and 50th in statewide school rankings. Those four states also ranked 49th, 47th, 48th and 50th, respectively, in terms of health. Even though I think that a child’s education begins and ends in the home (rather than the school), terrible schools and terrible health aren’t exactly conducive to our retirement mentality.
We also would give deference to living near a military installation or university. University areas often have a solid public infrastructure and sense of community. And both my wife and I were in the military and not only would that allow a familiar crop of rental tenants, but there are a lot of community-military relationship events that we think would make for a good environment to raise a family.
Note: I didn’t “screen out” any place on these lifestyle considerations—everyone is different, so the rankings below to reflect just the numerical data.
Here are the top 100 localities in the U.S. for retiring early—financially speaking. Once again, these are ranked with a composite number that is derived from a formula that weights Home Prices (60%), Taxes (30%), Cost-of-Living (15%) and Rent Ratio (5%). I also placed flags on the entry if their state was listed as top or bottom 10 in terms of health or schools.
A few trends I started seeing was that even though the home and rental weights were by zip code, a lot of states saw congregations at the top (IN, FL, OH) and the bottom (CA, HI, NY). We’ve highlighted in yellow those localities that we will try to visit this summer. Florida looks like a strong candidate given its low taxes, good weather, and cheap housing. Texas is all across the map, with some places like Houston and Austin being worse than average, but others like Waco, TX being near the top. Pensacola, FL ranked very high, and has a large military installation—so we thought it’d be worth visiting. North Carolina was a surprising repeater; if you move away from Raleigh-Durham and coastal areas, you find that a lot of mid-sized metro areas ranked very well.
We’re particularly excited about visiting Colorado. Very healthy, good schools, low taxes and good house prices outside of the big cities make Colorado an appealing dark horse in this race.
We ruled out great options in Indiana, Ohio, and Missouri because they’re a bit farther north than we’d like to live. And, as discussed previously, the gulf coast is littered with great options, but when looking at lifestyle factors like schools and health we eliminate those as options.
Here is a map that shows the ten places we’re looking to visit. Ideally, we narrow this down to a final four (or so), and look more closely at those over the next couple years.
One last thing…
This is a big country, and I’m 100% certain there are small pockets of Utopia right next to absolute disasters. I don’t mean to rag on the Gulf states or tax nightmares like CA, NY, or NJ—I’m certain there are a thousand places across this great land (yes, even in Mississippi) that we would love to live. Unfortunately, we can’t know everything, so this is how we’re starting our search. For instance, I ruled out Las Vegas even though it ranked 41st overall (higher than Grand Junction or Tampa). Why rule it out? Because I’m ignorant and I “think” that it will feel like I live in a gambling Mecca. I could be (and probably am) wrong—but I don’t know any better and I have to focus my search.
I would love to get more ideas. Nothing is set in stone. Where do you think makes for a perfect, economic and long-lasting retirement? I’m sure I’m missing a lot. Thanks for reading!
P.S. Here were the bottom ten locations…
I admire you if you can retire in California.