Retiring in Texas
Texas is on its way to becoming the new Florida, at least where retirees are concerned, after ranking in many “best of” lists when it comes to retirement. Two of Texas’ cities made the Forbes “Best Place to Retire in 2021” list: College Station and San Antonio. Texas also comes out on top in terms of affordability and is consistently in the top-five friendliest states in the U.S., coming in at No. 4 in 2021
Whether you’re already a Texan or thinking of becoming one, it’s important to plan for retiring in Texas with your eyes wide open. You want to go into retirement knowing all there is to know about life in Texas, from the cost of living, tax impact and healthcare costs to how you’ll spend your days.
In this guide, we explore all of the above and more. If you have questions about retiring in Texas that aren’t addressed here, let’s talk! Based in San Antonio, Texas, PAX Financial Group has a wealth of information that can help.
Relocating to Texas
There are a few things to know before relocating to Texas. First, brace yourself for the sheer size of it. Texas is home to more than 29 million residents, but with more land mass than any other U.S. state, you can’t always tell.
Texas’s size lets it offer some of the most diverse living of any U.S. state. It has the second most diverse population in the nation, behind only California, but also among the most diverse environments.
Whether you want to retire on a sunlit beach or in the rugged mountains; in the open country or in the urban jungle, there’s a Texas locale for you. Each of these regions have unique weather, costs of living and access to medical care. So, as you begin researching your move to Texas, make sure you familiarize yourself with the options and what each location has to offer.
If you do choose to relocate for retirement, give yourself plenty of time to research your options and find the right location and lifestyle for you. You may even want to rent for a while until you find the perfect retirement home. If you don’t buy a home right before or after selling your current one, think strategically about how you’ll handle the income from your sale. While the proceeds could cushion your nest egg, you may incur significant taxes. Harvesting losses on your investments in the year you sell your home can help offset the capital gains taxes on your home sale.
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Cost of Living
The Lone Star state ranks among the lowest cost of living states in the U.S. with an average cost of living that falls almost 10 percent below the national average. You can expect to pay below the national average for housing, groceries, transportation and healthcare in the state.
Some parts of the state are more affordable than others. For instance, Texarkana, Texas has some of the most affordable real estate in the nation, with housing-related costs one-third below the national average, according to Kiplinger. Residents also pay less than the national average for medical care and groceries.
Amarillo, Texas also ranks among Kiplinger’s 25 cheapest U.S. cities in 2021 with a cost of living that’s 18.3 percent below the national average. Residents living in the metro area pay 39 percent less for housing-related costs than the national average.
If you’re relocating to Texas, consider researching how the cost of living in Texas differs from your current state. This will help you create a more accurate picture of how much your living expenses will cost once you retire in Texas.
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Taxes
When it comes to taxes, the good news about Texas is that there’s no income tax, and Social Security is not taxed in the state. This means withdrawals from your retirement accounts and public and private pensions are not taxed. There’s also no estate or inheritance tax, which your beneficiaries will thank you for later.
However, Texas is not the most tax-friendly of states when it comes to property taxes. The state has the seventh-highest median property tax rate in the country. That said, the state does take steps to ease the tax burden for seniors. Seniors can alleviate this property tax burden through special deferrals, exemptions and other measures. For instance, seniors can defer their property taxes until their estate is settled after death. Seniors can also get a homestead exemption to reduce their taxable property value on their primary residence. Property owners age 65 and over can also utilize the “senior freeze,” which prevents school district taxes on residences from rising above the level they’re at when you turn 65.
Sales tax in Texas is also high, with the 14th-highest combined sales tax rate in the nation at 8.19 percent on average.
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Insurance and Planning for Natural Disasters
While the weather in Texas is generally pretty mild, like any state, there are natural disasters to consider. Texas has been hit with hurricanes, tornadoes, hail storms, wildfires and unprecedented freezes. With that in mind, homeowners’ and renters’ insurance premiums can be on the high side. Texas has the third-highest average homeowners’ insurance premium and fourth-highest average renters’ insurance premiums in the nation, according to the Insurance Information Institute.
These premiums are high for a reason. Hurricanes like Hurricane Harvey cost more than $30 billion in insured losses. The cost of an insurance policy is a small price in comparison to such damage. Luckily, most homeowners’ and renters’ insurance policies in Texas cover weather-related damages. The Texas Windstorm Insurance Association (TWIA) provides insurance policies with wind and hail damage coverage for people who are unable to get insurance through other providers.
You may need to buy additional coverage for flood, windstorm and hail damage, as not all homeowners’ policies cover these. The amount of liability protection in many homeowners’ policies is also limited, so it’s worth considering a separate umbrella liability policy for more coverage.
While insurance is important, there’s no need to panic. At PAX Financial Group, we can discuss your insurance coverage and what makes sense for you. If you’re new to the area, we can also help you incorporate the cost of insurance into your budget.
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Healthcare/Long-Term Care
Texas residents have access to some of the nation’s largest hospitals and healthcare systems. With more than 1,000 private and government hospitals in the state, you’ll likely have easy access to a hospital no matter where you live. Many of these hospitals are nationally ranked for specialties like cancer, cardiology and gastroenterology.
Medicare-aged beneficiaries also have access to many Medicare Supplement Plans and 137 Medicare Advantage Plans. Eleven of those Medicare Advantage Plans are rated 3.5 or above by the National Committee for Quality Assurance (NCQA).
There’s also long-term care to think about. While none of us want to believe we’ll need help with basic living tasks, the reality is that many of us will need some form of long-term care during our lifetime. Unfortunately, Medicare usually won’t help pay for long-term-care expenses. You’ll need to rely on your own savings or get long-term-care insurance or Medicaid to help cover these costs.
While Medicaid may cover the largest share of these costs, it’s only available to people with income and assets below a certain level. Long-term-care insurance can be a good option, with plans customizable to meet your needs.
The Texas Long-Term Care Partnership, a collaboration between long-term care insurance providers, agents and state government agencies, offers qualified policies that provide even greater financial protection than other plans. All Partnership-qualified policies are tax-qualified, meaning you take a medical expense tax deduction for part of the premium. The Texas Department of Insurance provides a list of companies offering Texas Long-Term Care Partnership-qualified insurance plans.
At PAX Financial Group, we can also help you review policies and choose the best long-term-care plan for you and your family.
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Day-to-Day Plans
As you prepare to retire in Texas, it’s important to think about your day-to-day plans. Many retirees are surprised by how hard it can be to adjust to post-work life. Some struggle with staying engaged in retirement without a job to provide a sense of purpose. After decades of working, the days can stretch on forever if you aren’t prepared to fill them.
Luckily, Texas has a lot to offer! Outdoor enthusiasts will find no shortage of activities, whether you love lounging on the beach or exploring the mountains. Texas State University lets any senior age 65 and over audit courses for free, if space allows. The state also has a plethora of senior living communities you can reach out to for activities.
Think about what you enjoy doing, but also who you want to spend your time with in retirement. This is particularly important if you’re relocating to Texas. Who will be your community in the state? If your extended family doesn’t already live in Texas, how will you stay in touch with them? Senior living communities can help you build a network of friends if you’re not a Texas native.
It’s important to approach retirement with a plan – both a financial plan and an activity plan.
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