If you’re feeling ready to relocate, you’re not alone.
A new survey from Upwork found that 5 million Americans have already moved because of remote work since 2020, and 19 million are planning to move because of remote work. More than a quarter (28%) of people polled said they’re moving more than four hours away.
In this new remote-work environment, many people are in the midst of this transition. Like generations before them, investors in the accumulation phase are still focused on retirement, but also seem increasingly interested in finding their version of an enjoyable lifestyle now. And for many people, that means relocating to a place that better suits their wants and needs.
Up until recently, a lifestyle-driven move more often made good sense; mortgage rates sat at a historic low at the beginning of 2022. Now, costs continue on the uptick (home values are up 18% from last year) and mortgage interest rates have bumped to around 5.54% for a 30-year fixed mortgage.
Relocating in uncertain times
In the current environment where inflation is high, volatility in the stock market is present, and fears of a potential recession hold weight, it could be very hard to move forward on such a big financial goal (i.e. moving to a new state and buying a new home). The uncertainty of such an environment makes decision-making that much more emotional. In this way, it ends up being a balancing act of securing your short-term financial situation in light of a big short-term goal that has long-term financial (and life) impact.
With this in mind, you want to ensure you do not get too deep into a home that you cannot afford. Or if your employment situation isn’t secure, I would recommend not putting yourself in a compromising financial situation.
Consider the following:
Maintain a strongly built-up emergency fund that can cover three-to-six months of expenses.
Pay down any high-interest debt.
Consider the income needed to cover your fixed expenses, potential new mortgage, and some of the non-negotiables in your monthly budget.
Do some critical thinking: Would all expenses be able to be satisfied if you or your partner lost a job?
We can’t plan for everything, but by mapping it all out and considering hypotheticals, you can achieve much more clarity in your decision making.
Keep in mind that deciding to relocate is about more than just numbers. Buying a home can be a major milestone for many people, but real estate doesn’t operate the same as traditional investments. Homes in many areas of the country actually generate very little to no (or sometimes even negative) return, the costs to buy and then sell can be high, and it’s not as easy to liquidate as other assets.
Instead, I like to think of buying a home as a lifestyle decision.
And while making big financial decisions, I’m a strong believer in not only getting a solid handle on your net worth statement and cash flow, but also seeking to understand your personal financial values.
Following is the process I would consider in order to get a well-rounded picture of your motivations and the tradeoffs of your decision to make a big move.
First, identify your values.
It’s easy to get so busy that we don’t really pause to think about our money priorities.One way to get on track is by solidifying your values. These 3-5 priorities give you momentum for reaching your goals; each step is tied to a specific, stated value.
Whether you’re single or have a significant other, I recommend sitting down individually to think through your own top five values. Then, if you’re in a committed relationship, take the time to share your personal financial priorities with your spouse or partner. Note the overlaps, and come up with your top five values as a couple or family..
In terms of relocating, think through the top five characteristics of your homebase. Are you driven by weather? Local culture? Natural resources? School districts? Choose a handful – and know upfront that there will be compromises.
Next, weigh your options.
I think it’s a fun exercise for people to create a side-by-side comparison of the top three cities or states and talk through the possibilities together. The “right choice” is often based on these more qualitative considerations. Discuss what you truly want, and why.
Within this framework, the conversation then naturally flows to financial-based factors like state taxes and cost of living. For those still growing their wealth, many may be considering a move to more affordable areas. They want to stretch their dollars and have the flexibility to work fewer years or devote their time to passion projects.
I encourage you to keep your values at the center of the decision-making process. For instance, maybe one costlier option pushes out your retirement timeline, but you feel most drawn to living there. At the end of the day, that’s OK if you’re able to make tradeoffs.
When in doubt, ask yourself: What place aligns with our top five values?
For instance, I live in San Diego. You can’t beat the weather, but there’s something to be said about having more space for a young family. For my family, it’s about identifying what matters uniquely to us.
Make use of free resources.
Once you’ve identified a couple of top contenders, as well as a potential timeline, you can add that information to our free Retirement Planner to see how the different options may steer the success of your long-term plan.
The Retirement Planner allows you to project your future savings based on different scenarios. Let’s say you want to relocate to a sunnier, higher-taxed location. We can pull different levers to see if that’s possible – perhaps investing less for the next three years, or creating a new savings goal. I appreciate this exercise because it instills confidence and clarity around simple possibilities.
In the end, I don’t believe that math shouldn’t necessarily dictate the answer of where you choose to relocate. Instead, be guided by your household values, and refer to your Retirement Planner, in order to determine your day-to-day actions that ladder up to your big goals.
Get Started with Personal Capital’s Retirement Planner