6 Tips for Finding an Affordable Place to Retire

There are few quick remedies for a fractured nest egg. But one way to give your retirement security a boost is to find a retirement locale that is more affordable than where you live now. Consider these factors when selecting a low-cost place to retire.

Cost of housing. If you're on a fixed income or living off your portfolio, the cost of housing can ease or bust your budget. You can, of course, boost your net worth by selling your current home and downsizing to a smaller one or moving to a place where housing costs less. But moving itself is expensive, so do some research before you plunge into a new real estate market. David Savageau, author of Retirement Places Rated, recommends renting in a new retirement city until you get a feel for the local housing market. "Real estate salespeople just love newcomers because they're not perfectly aware of the market, and the price you will pay is perhaps more than what a local would pay," he says.

Tax rates. Your tax bill can vary considerably by state. Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Some other states also exempt all or part of pension income from taxation. Two states, New Hampshire and Tennessee, tax dividend and interest income only. There are also five states where you can live free of sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Be on the lookout for age-related property tax exemptions or deductions. To find out which types of retirement income are exempt in your state, contact the state's department of revenue. You can also peruse state tax rates at taxadmin.org.

The local economy. Many baby boomers will need to work during the traditional retirement years. So, make sure your retirement destination has a sound economy and job opportunities you might be qualified for. "You want to find an economy that is stable, not one subject to booms and busts," says Bert Sperling, founder of BestPlaces.net. Three industries currently hiring older workers (that are also proving to be relatively recession resistant) are healthcare, higher education, and the government. So, consider places with large hospitals, universities, and state capitals. "College-town economies tend to be very stable, and even in a down economy they tend to support many high-wage jobs and 'echo' jobs that support the college and staff at the university," says Andrew Schiller, founder and CEO of NeighborhoodScout.com. "If it is a significant university, often they have a medical center and a research and teaching hospital, and they provide exceptional care that you wouldn't necessarily be able to get in other towns the same size."

Proximity to family. If you plan to travel frequently, make sure you have easy access to an airport or train station. And if you can't or don't want to drive, explore other ways to get around town. It's helpful to have family nearby to help pick up a prescription or groceries. But also look for good public transportation, especially if it comes with a senior discount. People age 65 or over in Pittsburgh, for example, can ride Port Authority buses and trains for no charge.

Amenities. It is obvious that you should avoid cities with high crime rates. Also make sure good healthcare is available, especially if you have a chronic condition. But don't forget about golf courses, museums, parks, farmers' markets, religious institutions, and shopping. An idyllic retirement town isn't a good value if it doesn't offer the activities you enjoy.

Weather. Try out a retirement spot during all the different seasons before you move. "Minneapolis in the winter is far different from the summer," cautions Sperling. In cold places, you'll face higher heating bills and snow removal costs, but air conditioning expenses can bust your budget as well. And, let's face it, you'll probably never be completely satisfied with the weather. "You just learn to do things inside when there is cold winter weather outside," says Marion McFadden, 85, a retiree in South Bend, Ind., who previously lived in Arizona. "In Arizona, we learned to do things inside in July and August when the temperature outside was 118 or so."