5 Keys to a Smart Retirement Move

If you do opt for a home loan, a clean credit record and cash in hand for a fat down payment will get you a better interest rate. That will let you take advantage of today's relatively low fixed rates on most mortgages, which economists expect to hold steady for the next year or so.

If your expected income from Social Security, pensions, and other sources isn't going to be enough, you may need the cash generated from selling your house for living expenses.

2. Tax-free gain: Married couples can exclude up to $500,000 in capital gains from the sale of a primary residence (single homeowners can exclude $250,000). This rule can be a windfall for retirees who own highly appreciated residential property, as long as they have owned and used the house as a primary residence for two of the past five years. Home flippers, if there are any left, need not apply.

3. Tax Consequences: Moving from a high-tax state to a low-tax state is key. Look at income, sales, property, estate, and inheritance taxes. Seven states have no personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. However, 26 states (and the District of Columbia) that have broad-based personal income taxes do not tax Social Security benefits. Others don't tax private or public pensions.

Many people pick a retirement destination purely because there is no income tax. "This is a serious mistake, since higher sales and state and local property taxes can more than offset any lack of a state income tax," says Bill Stromsem, director of taxation for the American Institute of Certified Public Accountants. Florida, for example, imposes no income tax but makes up for that with sales and property taxes. State sales taxes vary greatly, with some at 7 percent or more. Only five states—Alaska, Delaware, Montana, New Hampshire, and Oregon—have no sales tax.

Property taxes are generally the heaviest tax burden for homeowning retirees. States with low median real estate taxes include Alabama, Delaware, Hawaii, and Louisiana, the Tax Foundation says, while those with high real estate taxes include New Hampshire, New Jersey, and Texas.

Most states give breaks to residents over a certain age, and there may be property tax credits or homestead exemptions that limit the value of assessed property subject to tax. But it's usually not up to the state to judge the total taxable value. That's in the hands of a local assessor.

Best advice: Check out the total tax picture of your possible destinations and compare them side by side, advises Stromsen. "There's no free ride from any state. You may win on some taxes and lose on others. And you certainly don't want the tax tail to wag the dog. Go where you want to go," he says.

4. The Medicare mix: Medicare premiums vary by market. Each place has its own blend of medical facilities and insurers. For the prices and terms of carriers that serve your future community, check Medicare.gov and the website of the state's department of insurance.

5. Utilitarian thinking: Daily living costs fluctuate from place to place. Moving to a smaller residence will immediately save you money on utilities and maintenance costs. Depending on the climate where you settle, you might not even have to shrink your living space to slash utility bills. That was Footlick and Cleveland's surprise. Even in a larger home, their energy bills are down considerably from what they paid up north.

With Raleigh-Durham International Airport just 15 minutes down the road from their lakeside home, those savings make trips back to Manhattan for a splash of bright lights easy to work into their retirement budget.