For many, planning for retirement goes far beyond setting money aside. A significant number of retirees also want to relocate, leaving the city or state where they spent the last chunk of their career for an area that better meets their needs going forward. Where you decide to go ultimately has a substantial impact on your retirement, both from a financial and quality of life standpoint. If you want to make sure that you can retire well in Washington, here’s what you need to know before you pack your bags and head to the Evergreen State.
Cost of Living
When you’re exploring retirement destinations, one of the first things you should take a close look at is the state’s cost of living scores. These metrics help you assess a region’s affordability at a glance, allowing you to estimate whether your savings will support the lifestyle you want.
Cost of living scores are fairly simple to understand. First, the national average is always sitting at 100. When a state has a score that comes in above 100, that means costs are higher in that state. Scores below 100 indicate taht the state is cheaper than the national average.
Since every state gets scores, you can not only compare them to the national average but also to each other. For example, if you have two states on your maybe list and want to factor in affordability, you can see how their cost of living scores compare to each other.
Higher Than Average Cost of Living
Washington is known for higher than average cost of living scores. The Evergreen State’s overall score is 112.8. Additionally, all of its individual category scores aside from one cross the 100 mark.
For groceries, Washington comes in with a 108.8. Transportation and healthcare are 121.5 and 120.5, respectively. Utilities, however, sit at 90.7, putting those notably below average.
When it comes to housing, the Evergreen State has a score of 120.5. Average home values in the state tell a similar story. While Washington’s average home value is $470,304, the national average home value is just $269,039. That’s a difference of $201,265.
And that doesn’t necessarily mean that housing is of higher quality in Washington. Instead, if there were two comparable properties, one in Washington and one in an area that mimics the national average, the house in the Evergreen State would simply cost more than the other, even though the properties are essentially the same.
Tax Considerations
Now, while Washington does have a higher cost of living than many other states, cost of living scores are only one part of the equation. It’s also smart to take a look at tax rates in the area.
How much you’ll need to pay to cover your taxes impacts your retirement. If a big chunk of your retirement income has to go to tax payments, you’ll have less available in your monthly budget to cover expenses or the cost of recreational activities. That directly impacts your quality of life, as well as how long your savings last.
One benefit of choosing Washington for retirement is that the state does not have its own income tax. You don’t have to pay state income tax on earnings, Social Security, retirement plan distributions, or anything else if you live in the Evergreen State.
However, there is an estate tax. While you only have to file an estate tax return if the estate is equal to or above the exclusion amount ($2,193,000 for 2021), it’s wise to keep that in mind, if not for yourself, for the person who may inherit your estate.
Washington Does Have Sales Tax
Additionally, Washington does have sales tax. The base rate is 6.5 percent. But cities and counties are allowed to add onto that, and virtually all of them do, pushing the rate you pay up.
The amount of sales tax variation is actually substantial. On the low end, you have places like unincorporated Klickitat County, which comes in at 7 percent. On the other side of the equation, Lynnwood, Mill Creek, and Mukilteo have a tax rate of 10.5 percent. That’s a 3.5 percentage point difference.
When it comes to property taxes, the state’s rates tend to be near or slightly below the national average, though the higher than average property home values can still make the amount owed hard to manage. Luckily, seniors may be eligible for certain programs, including property tax exemptions, that reduce their tax burden.
Qualifying individuals may be able to take advantage of the property tax exemption for senior citizens. There is also a property tax deferral program for seniors that may be worth exploring, depending on your unique situation.
Part-Time Job Opportunities
If your plan is to leave your main career but still work part-time, then looking at an area’s unemployment rates is smart. This may help you estimate how hard it will be to secure the right opportunity, ensuring you can limit your reliance on savings or boost your budget after you retire from your former career.
As with many areas, COVID-19 hit Washington fairly hard, leading to widespread unemployment. Pre-pandemic, the Evergreen State’s unemployment rate was just 3.8 percent (Feb 2020). By April 2020, it hit 16.3 percent.
While Washington has been recovering, reaching an unemployment rate of 7.1 percent by December 2020, that rate is above the national average. During that month, the national average came in at 6.7 percent. Even though the difference is relatively small, it does mean that part-time job opportunities may be trickier to come by in the Evergreen Stated.
May Take Time to Get A Job
Ideally, retirees who are moving to Washington and want to work in a new part-time position shouldn’t assume that they’ll snag a job quickly. Instead, it’s better to plan as if you’ll need to rely solely on savings for at least a little while. That way, you’ll have access to enough income during your search, ensuring you don’t experience an unnecessary hardship.
It is important to note that unemployment rates will likely improve in the coming months. Recovery efforts are definitely moving forward, thanks in part to the increasing distribution of COVID-19 vaccines. Still, a full recovery will take time, so it’s best to factor that into the equation.
Best Cities for Retirees in Washington
When you are choosing where to put down roots during retirement, you have to look not just at the state but also at each city you may head toward. As mentioned above, sales tax rates vary in Washington. Additionally, every city offers something unique, and certain towns may be better fits for your lifestyle and finances than others.
If you know you’d like to head to Washington but aren’t sure which cities are the best options, there are a few that should make your shortlist. For retirees who prefer a decent-sized town, Olympia can be a great choice. It’s the state’s capital and offers easy access to all kinds of critical amenities, including medical care, shopping, and more. Plus, it’s situated on the Puget Sound, is near many state and federal parks, and is less expensive than cities like Seattle or Tacoma.
Gig Harbor
Gig Harbor is another stellar location to consider. It’s also on the Puget Sound, offering excellent water views and outdoor recreation activities. Plus, it’s got a substantial senior population and plenty of medical facilities.
Snohomish
Snohomish is also a fun choice. Along with being near the Puget Sound and the Okanogan-Wenatchee National Forest, the city has a charming historic district brimming with shopping options. It also covers your critical amenities and actually has a lower tax burden than many other cities that are popular with seniors.
Lynnwood
If you want to be near Seattle, the suburb of Lynnwood is a solid choice. There are plenty of amenities and recreation opportunities in town, but you’re also close to the state’s largest city, making it easy to explore everything Seattle has to offer, too.
Anacortes
For seniors who love boating, Anacortes might be your best bet. It’s situated on Fidalgo Island, which is also home to Deception Pass State Park. You can easily take a trip to the nearby San Juan Islands, a great spot for whale watching, and there are also ferry lines from there that can take you to Seattle.
How Much Money You Need to Retire Well in Washington
With the higher cost of living, it does take more money to retire well in Washington than in some other states. However, if you plan for the amount of income you’ll need, you can certainly pull it off.
Generally speaking, you’ll want access to $71,124 a year if retiring well in the Evergreen State is your goal. With that, you can usually cover your needs along with some wants, ensuring your retirement is fulling and comfortable.
Do you know of any other amazing tips or pieces of information that can help someone retire well in Washington? Share your thoughts in the comments below.
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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