The Smart Take:
It’s that time of year again. The northern states are filled with grey skies and cold, wind, and snow. If you’re thinking of heading south for the winter, here are four key considerations to making your snowbird experience a success.
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10 Best Retirement Cities Episode: https://retiresmarter.podbean.com/e/top-10-best-retirement-cities/
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Introduction: Welcome to Retire Smarter with Kevin Kroskey. Find answers to your toughest questions and get educated about the financial world. It’s time to Retire Smarter.
Walter Storholt: Hello again, right back here on Retire Smarter. Walter Storholt, alongside Kevin Kroskey, president and wealth advisor at True Wealth Design serving you in Northeast Ohio. It is a great way to start 2020 with a brand new episode of Retire Smarter. Kevin, great to talk to you once again, although we at the time of this recording have not flipped to the calendar page to the new year. If someone’s listening to this show, they have done that already. Happy new year. Early to you, but on time to everybody else.
Kevin Kroskey: Yes, a happy new year to all the listeners. We’re in the home stretch before Christmas here. Having a six-year-old … It’s quite a fun time in the Kroskey household. We got to have a Santa brunch over the weekend. I don’t know if it’s my daughter’s watching too many YouTube kids shows, and she’s coming onto this, but the elf on the shelf visited our home on December 1st. Our elf’s name is Sprinkles. My daughter is somewhat concerned that she is not going to have any presents under the tree and is instead going to have a lump of coal. I love the elf on the shelf. It is just a very powerful, powerful thing to have in your home.
Walter Storholt: That is too funny. Do you not find the elf on the shelf creepy at all?
Kevin Kroskey: Creepy? No. I heard another young parent with a three-year-old say that they did not want to do it because he had to move it around every night and get creative and come up with some new scene. I just told him point-blank … I’m like, “You’re really missing the boat here.” One, it’s fun, but …
Walter Storholt: That’s the point.
Kevin Kroskey: Yeah, it’s fun. Two, it’s … My daughter is fantastic. She is a little sweetheart. Yes, I’m completely biased in saying that, but she is a well-behaved child. It’s nice to hear those sorts of compliments from her teachers and others. It is pretty remarkable just the power of this thing. If she does anything that mom or dad doesn’t like and we gaze over at the elf, she gets back straight and at attention in quick order. I love it.
Walter Storholt: That is too funny. The elf on the shelf helping parents for the last decade or so. A fantastic little invention for folks that utilize. Hopefully, everybody is on their best behavior through the beginning of 2020 and Christmas, and the rest of the holidays go smoothly or went smoothly for all. As we turn our attention to January and the new year, I know that your eyes often start to yearn for a little bit warmer location and get your heart set on experiencing the warmth and the sands of the Florida coast. We’re using that as our inspiration for the next couple of episodes of Retire Smarter. Today, Kevin, we’re talking about snowbirds and in particular four financial tips for folks who may have their heart set on currently or perhaps one day it’s in their goal to retire or as they transition into retirement to become snowbirds themselves. Certainly a common phenomenon among many Ohioans, right?
Kevin Kroskey: Absolutely. If I back up a moment, starting in 2010 or 2011, I was in a membership group for different wealth advisors. We would meet twice a year, and for obvious reasons, we would go South in January. We would often be in Naples, Florida. I had an affinity for the area. Certainly liked to be outside, to be active and not just stuck on the inside. I set a goal with my wife that I’d like to do this snowbirding thing. I wasn’t sure how it was going to happen. We didn’t have any children at the time. My first daughter came in 2013, but after she came, the intent was my wife was going to go back to work. She was a greeting card writer at American Greetings for ten years. She was going to be a mom and go back to work and do a four day a week thing.
Kevin Kroskey: When the time came, really biology took over, and she didn’t have the heart to leave our daughter, Aubrey. We ran the numbers, and thankfully, we weren’t in a position where she had to go back to work, and we could be a one-income family. Then after that transpired quickly, my mind just said, “Hey, if you don’t have to go back to work,” … All of a sudden, we had this newfound flexibility. For me being my own boss, I certainly have different client duties that I have to do, responsibilities I have to meet, and what have you, but there’s some flexibility that I have to meet those from maybe afar. Let’s go ahead and try this thing out.
Kevin Kroskey: Our first year, we went down to Hilton Head, South Carolina, in January, and it was great. It was still relatively cold. I think the average temperature was in the 40-degree range. We just did one month to give it a shot and see how it went. I just worked remote. I worked at a kitchen table. It was just more of a trial run. Let’s see how it goes. Let’s see if we like it. Let’s see if I can do what I need to for the business, and then maybe we can get more serious about doing something more for longer. We did that in 2014. Since 2014 my family and I have been Florida snowbirds. That’s gone anywhere from being down there for about three months to … One year we were there for seven months. There were some personal reasons for that and won’t dive into it. It was all good stuff, but we spent a fair amount of time there.
Kevin Kroskey: We enjoy going back and forth. We love when we get to Florida in January or late December and feeling the warmth and seeing the sun and all the green. Then when we come back in usually around April or May, we love seeing some hills. Florida is pretty flat. We love seeing some of the places and people that we’ve missed. We love seeing our Ohio home. We feel like we have the best of both worlds.
Kevin Kroskey: Over time, what has happened also is our client base has grown. I would say somewhere in the order of about 15% of our clients are snowbirds. They’ve got their place in Ohio, and they have another place. Generally, it’s in Florida. We have a few Arizonans, Arizonians. However, you say it. We have a few people that go down to Georgia as well. Actually, somebody that’s gone down to Chile for the last four years. A little bit more international there, but it’s become more common.
Kevin Kroskey: What I figured we do … We kicked this off a few episodes ago when we went through a list of the top 10 retirement cities, and I believe … I think five out of the top eight were in Florida. We can link to that in the show notes, but it was a pretty good study with some objective and measurable criteria that you can sort through and figure out, does that criteria apply to me? Then for this episode and at least the next one, we’ll see. We’re starting a new series here. We’re going to go back to it and talk about some financial tips for snowbirding. Then we’re also going to go through Ohio specifically next time about how you need to go ahead and dot some I’s and crossing T’s to make sure you can avail yourself with some of the benefits of doing so.
Walter Storholt: Like with anything, this certainly takes planning if you want to do it efficiently and do it the right way, also I think to maximize your opportunity. I’m sure that’s something that you found when you were trying things out for that month trial run in South Carolina before you then figured, Hey, let’s go down to Florida and try it there. Not only a little bit of trial and error but just seeing what you like and just doing your homework. Just like with anything else in life, this is an important thing to also do that with. Not necessarily saying, “Hey, let’s go be snowbirds in Florida” and buying a place and immediately moving there. It’s nice to have that trial run.
Kevin Kroskey: Absolutely. That gets into the first tip that we would say. What we will kick off the list here is try before you buy. Pretty self-evident in terms of the topic, but go and if you haven’t been to a place in Florida … We hadn’t been to Naples … We had been to Naples for my business purposes, but we hadn’t been there as a family. We hadn’t spent a lot of time there. I was staying in a hotel for a few days and more so inside the hotel and getting a little bit of the benefits of being outside. Naples, at least particularly the downtown part, was expensive, so that wasn’t an option for us.
Kevin Kroskey: I remember saying to my wife, there was a certain area … I’m scrolling through Zillow and looking at the cost of housing and what have you. There was … I’m not going to mention the town, but there was a certain town that wasn’t too far from Fort Myers airport, which was a nice direct flight here from Northeast Ohio. It was pretty cheap. I remember arguing with my wife. I’m like, “Honey. It’s the same sun that Naples has. It’s just the real estate that is one 10th of the value. It’s the same sun, though.” She, of course, looked at me and just started shaking her head side to side and not up and down like, “No way. It’s that price for a reason.” Sure enough, after we spent some time in Florida, that town is often the one that’s on the news where not so good things regularly happen.
Kevin Kroskey: Go out, try out a few places. You’re renting for … If you’re going to be a snowbird and renter, usually, the seasonal rentals are for an entire month, if not for the entire season. To get something short for a week or two weeks … One, I don’t think it is enough for you to get a sense of the area and see if you like it. It’s more like you’re just on vacation rather than living there. Two, again, from a rental standpoint, you’re probably going to have to sign up for at least a month. Maybe you’re going to go and check out somewhere outside of Tampa. Maybe you’re going to go a little bit further south to say Venice, Florida. Maybe you’re going to go further south to around Naples or Fort Myers or something of the sort or even over the other coast. Maybe it’s not Florida. Again, maybe it’s over to Arizona. Whatever floats your boat, but trying before you buy is typically a good way to go about doing it.
Kevin Kroskey: We’ve had several clients, however, that have a group of friends in a location in Florida. They visited them there. They have that nice network already built-in. Maybe these were work friends or church friends or even family members. They know where they want to be. They know what’s important to them. They know they want to be close to their friends. They’re looking at, do I want to be in the same neighborhood or somewhere close by? In a case like that, it’s easier to justify just going ahead and buying. Nobody likes to move twice, but if you’re pretty certain that these are the criteria that are on our wishlist and being close to friends is high up there, then that gives you a much smaller diameter that you’re searching for on the map. A couple of things to think of there.
Kevin Kroskey: Even with that, if you’re going outside of the neighborhood where your friends are, every neighborhood has its own feel. A lot of Florida has these communities, these gated communities, and each one could have a very different look and feel, even though they can be adjacent to one another. It’s still not necessarily a bad idea to just go in and rent and spend a month or even a full season there. Look around at some real estate, kick the tires on the neighborhood, all those sorts of things. Drive to the attractions of the restaurants that you want to go to, see how the traffic is while it’s in season, and just really home in if that’s the right place for you.
Walter Storholt: Try before you buy is tip number one on our four financial tips for snowbirding in Florida. Kevin, before we go too far down the road, I want to make sure that if folks are interested in learning more … If you clicked on today’s show, I’m going to guess you have a slight interest in snowbirding. We want to tell you a little bit about the guide that Kevin has put together specifically for snowbirds. It’s the Ohioans Guide to Snowbirding in Florida. This is something Kevin that you’ve put together to help people learn all the nuances, some of which we’re going to go over on today’s show. All the nuances and things to consider when it comes to making that decision to start living part or even the majority of the year in a new location and all the layers that are involved in that decision.
Walter Storholt: If anybody wants to get that guide, you can look at the link that’s in the description of today’s show. You’ll see a link for the guide. You click on that. That’ll take you to a contact page where you can reach out to Kevin and request the guide. Just check the description of today’s show for that. If you’re already on the website listening, you can click on the contact form at truewealthdesign.com. That’s truewealthdesign.com. For those of you who are old school and want to use the phone, that’s fine as well. 855-TWD-PLAN. 855-TWD-PLAN. Call in and request the guide. Kevin’s going to know what you’re talking about. If you mentioned the words snowbird and guide, we’ll narrow it down from there and know what you’re looking for.
Walter Storholt: I know that this has got to be the question on a lot of people’s minds. If they’re thinking about this for the first time, they may not have researched it yet, Kevin. That’s when it comes to that decision about residency. Where do we … If you start living in two different places for large chunks of the year, where is truly what you would call home, not only for the heart reasons but also for the tax implications and those kinds of things?
Kevin Kroskey: Yeah. I can’t tell you how often I’ll hear a statement, something to the effect of, “If you’re outside of Ohio for six months, then you’re non-resident for tax purposes.”
Walter Storholt: That’s what I was thinking, yeah.
Kevin Kroskey: That’s not accurate.
Walter Storholt: You would be wrong.
Kevin Kroskey: Yes. As listeners have learned, details matter, and this is one of those areas where the details definitely matter. With any tax situation, there are varying levels of risk. If you’re a highly paid executive at Good Year, a local fortune 500 company in Akron, Ohio and you have millions of dollars in your deferred comp plan, and you are going to change your residency to Florida, or you have some options that you’re going to take down there and exercise post-retirement, Ohio is missing out on a lot more than if we’re talking maybe a couple of thousand dollars a year.
Kevin Kroskey: There are varying levels of degrees of risk here for sure. In short, you can have more than one home, but you can only have one domicile for legal purposes. This is where those details do matter. One of the things … We’re going to actually get into this in the second, in the next episode more in detail, because there is a lot to it. I’ll just talk about more of the qualitative and higher-level quantitative traits about choosing your residency.
Kevin Kroskey: The obvious plus for Florida is no state income taxes. For Florida, you’re not going to have any state income taxes, but Ohio has had decreasing tax rates now for several years too. The top income tax rate is now just a smidge below 5% and if you have business income, it’s actually capped at 3%. If you’re talking about a couple of hundred thousand dollars of income, that’s certainly going to add up. If you’re talking about $50,000 of income, probably not that big of a deal. Particularly if more of your income is comprised of Social Security because Ohio does not tax Social Security. In that effect, you could have say husband and wife with two good Social Security benefits paying somewhere north of $60,000 a year. Maybe there’s another $40,000 that they’re taking out from their IRA.
Kevin Kroskey: They’re having a nice lifestyle, have a $100,000 of taxable income hitting their tax return, but when you look at their state income tax return, it’s really only the $40,000 from the IRA. You still got to look at the numbers and figure out what makes the most sense, but the no state income taxes for most people is quite attractive.
Kevin Kroskey: One caveat to that is that Medicare costs are generally higher in Florida than they are in Ohio. There are some other things that go along with being higher cost in Florida, things like your car insurance or property taxes. Obviously, there’s not much you can do about that. You could have an Ohio car down in Florida at least for a period of time. If you’re going to keep it down there and continue to pay Ohio property and casualty rates. Your Medicare costs, again, if you’re documenting your domicile to be Florida and being a non-resident for Ohio income tax purposes, then the Medicare costs, you’re going to basically select your Medicare plan based on your location and your zip code down in Florida. The cost could be a little bit higher.
Kevin Kroskey: In the example that I gave about having around a hundred thousand dollars of income hitting your tax return, but maybe 60 of that from Social Security, it’s very possible that the increased costs for Medicare could basically equate your state income tax savings by being a Florida resident in that case. If that’s the case if it’s somewhere around a push, why jump through all the hoops that you may need to do to go ahead and document your Ohio non-residency?
Kevin Kroskey: You got to look at the numbers. There’s going to be different inflection points over somebody’s retirement time. I mentioned Social Security. For a lot of our clients, they’re not starting that until their later sixties or maybe even as late as age 70. If you have somebody that’s retiring and becoming a snowbird, say at 60, they’re probably going to have more taxable income in Ohio in the early sixties than they are in their later sixties because of Social Security coming in. Their tax planning, we’ve talked about a lot in the last few episodes. It is a yearly thing that you need to be doing in order to make sure that you’re not just paying your fair share and not anymore. This is another example of that.
Walter Storholt: The big takeaway there, definitely don’t just buy into the six months and a day. You claim the residency in the lower tax state and boom, you’re done. Not as simple as that equation. As Kevin mentioned, we’ll dive into this conversation a little bit more in the next episode. If you want more details and more of the nuances that go into that conversation, tune in to the next edition of Retire Smarter where we’ll go deeper into that topic.
Walter Storholt: We’ve got our two financial tips so far for snowbirding in Florida. Try before you buy and that residency decision and the things and elements that go into that. What’s the third financial tip?
Kevin Kroskey: The third is know the flow. Here we’re talking about cash flow. If you’re renting, it’s pretty straight forward. It’s just whatever your rental costs are plus any travel that you may have back and forth. Although you may already have a travel budget in your retirement plan. You can think of it as just using some of that if that is the case. It’s more of a substitution or using some of that travel budget rather than adding to it. If you are buying, however, it’s going to be more complex. We mentioned the communities. Again, there’s a lot of, and it took a little adjustment for me personally to get used to these gated communities in Florida. We don’t have that here in Northeast Ohio, at least not that I’ve seen. Maybe there’s some that are around that are a few levels above my pay grade but I haven’t seen it.
Kevin Kroskey: When you get down to Florida, it’s very common. I don’t know the Genesis of it. I would speculate that certainly, I see some benefits to it. You have people that are coming down for part-year. The association will go ahead and make life easier. They’ll take care of the grounds. they’ll take care of any number of things, mowing, landscaping. They may include basic cable service or even alarm monitoring in your monthly association fee. Some communities even have a golf course and golf membership built into it as well. It’s nice. Whenever my wife and I pack up the house and we had back North come April or May, then we really don’t have to worry about the grounds. We do have a pest control service that comes around and sprays. Lots of bugs down in Florida and all kinds of other creatures. Walter, quick aside, going for a walk in the woods in Ohio is great. In Carolinas, where you’re at, is great. You do that in Florida, we might not see you again, so be careful down there.
Walter Storholt: The size of the mosquito is … I believe it’s the state bird. You have to be careful when you get that large of a mosquito flying around.
Kevin Kroskey: Did you just say the mosquito is the state bird of Florida?
Walter Storholt: I think you can also use that … Mainers also use that joke too, that the mosquito is the state bird of Maine.
Kevin Kroskey: When I was in Hilton Head the first year, they have the Palmetto bug. I don’t know about you, Walter, but this Palmetto bug sure looks a lot like a cockroach to me.
Walter Storholt: It looks a lot like a German cockroach. Yes, you’re exactly right. My dad is a bug man. He hates being called a bug man obviously, so I shouldn’t do that to him. He’s worked for a pest control company his whole career and runs a great pest control company in North Carolina. I’ve gotten all sorts of good bug stories over the years. I can only imagine how good the stories must be in Florida if they’re as good as they are in North Carolina, where they’re bug season is really only half of the year, not all year round.
Kevin Kroskey: Yeah. In our former neighborhood in Florida … Let’s see, we’re … The further inland you go from the coast, certainly, the more affordable the properties are and the more families that you’ll find, which having a young family was important to us. We were right on the edge of nothingness in some regard. It was protected swampland. Let’s see, we had wild boar, we had bears that came up in the rainy season because their hunting ground was all flooded out. Certainly, you had a lot of alligators and snakes and you name it. We had black Panthers running through there. I was not going in those woods, Walter. No, thank you.
Walter Storholt: Armadillos. You just got all sorts of stuff down … I had a great, great aunt who lived in Orlando. She had essentially like an Armadillo for a pet. It basically lived in her backyard and was always hanging out and hanging around. It was like, I didn’t know Florida had armadillos. I thought that was more of a Texas only thing. They literally have at least one of everything in Florida, I’m pretty convinced.
Kevin Kroskey: If they didn’t have it, you get some more on that brings it there, like these Burmese pythons.
Walter Storholt: The pythons, yeah.
Kevin Kroskey: It just starts taking over the Everglades and eating all the alligators, which is not necessarily a bad thing in my book. I don’t get these wild pet people. If there is a wild pet person that’s listening to this, don’t call my office. I don’t want anything showing up here. I digress.
Walter Storholt: Keep it in Florida, just away from the slice where Kevin visits.
Kevin Kroskey: We have the association taking care of this stuff. We have pest control. That could certainly be built-in as well. If you do have a pool, certainly you could maintain it while you’re there. If you’re not there just to make sure you don’t come back to a green pool, then maybe you need to have somebody come in. You add all these up and these are going to be your caring costs. All the stuff the association does, your HOA fee, the other stuff you pick up, your property taxes, insurance, utility bills, maybe a home watch service. Just to have somebody, some boots on the ground, walking through your property and checking it out. Some people don’t do that.
Kevin Kroskey: There’s a lot of technology that you can use these days to keep an eye on your property as well. Whether it’s … You see those Ring doorbells or some cameras on the inside. I know some people that use a home watch service. They’ll have somebody that literally goes through their house say twice a month or something like that and others will just use technology. Whatever works for you. Those are all your annual caring costs. Those are the things that, if you’re in a home for 10 years, you’re going to have those expenses. They’re going to increase with inflation more likely than not over time. The property taxes are going to go higher, the insurance is going to go higher, the HOA fees are probably going to go higher, so on and so forth. You need to know what those costs are because after we go ahead and understand those costs, then we can fit it into our retirement plan.
Kevin Kroskey: Before we go there, one other thing to mention is while those carrying costs are annual and they’re going to increase with inflation over time, anybody that’s a homeowner … You’re going to have some things that … Maybe you want to make an improvement to your home. Maybe you need to buy furniture though it’s more common to buy furnished homes in Florida because of the snowbirds coming and going. Maybe you even need a … “Hey, I don’t want to bring the car back every time. I’d like to keep one there. Rather than having a trade-in, maybe I’m just going to buy, keep the old car and I’ll leave that in Florida. I’ll just go buy a new one without a trade-in.” Some of the costs that you’re going to have are going to be more one-time or infrequent.
Kevin Kroskey: You’re going to need to understand those, but the caring costs are going to be even more important since that’s a year in year out thing. To do a brief recap, the try before you buy. Let’s choose a residency. Really look at the numbers, figure out what makes sense. This could be a change over time as you go through your retirement time period and your income tax situation changes. You need to know the flow. That generally consists of your annual caring cost as well as any one time or semi infrequent expenses that you’re going to put into the home. Now after you have this, you really go back to your retirement plan. Certainly, you’ve done some modeling already to figure out, can I afford this? Can I do it? What’s my budget for buying a house for the carrying costs and what have you. Now basically, you’re firming up. You did some modeling, you created a budget, and now you’re going back with the actual.
Kevin Kroskey: One of the things that when you think of the net impact on your retirement plan. I’ll just walk you through a simple example and then we’ll talk about a little bit more complexities upon that. Let’s say that you have cash in the bank. You have $300,000 that’s just sitting there that you’ve already set aside for your new Florida home. Walter, what’s cash in the bank paying you these days?
Walter Storholt: Still less than a percent these days?
Kevin Kroskey: It’s pretty low. Certainly, some people are much lower than that. If you’re hunting you can get maybe closer to 2% but somewhere around there. Maybe anywhere from zero to 2% if you will.
Kevin Kroskey: If you go ahead and if you just have that cash and you convert it to buying the house, you still have an asset. It’s just not liquid anymore. Now you have home equity and it’s illiquid. You can’t use it until you sell it or I suppose if you did use a mortgage in some fashion, you could take some money out. Let’s assume that you didn’t do a mortgage and let’s say that your home appreciates the same rate as your investments. If your investments really are … Say you’re overly conservative. If anybody is listening to this and you have 300,000 in cash, probably not the most appropriate thing. Sure, if you’re Bill Gates, it’s just a rounding error. Not a big deal. For most people … I can’t think of any client that we have that … I can think of maybe one or two that has that amount of money in cash, but definitely atypical. Not the norm, pretty low rate of return. very conservative, but very low rate of return and tax-inefficient.
Kevin Kroskey: If that’s your hurdle rate, let’s just say it’s 2% and the home appreciates at 2% and you use the home for say 10, 15, 20 years, then you sell the home and now the proceeds come back into your plan. You can use that for spending in your later years in retirement. The only true net cost that you had over those 10 to 20 years is really just the caring costs. Your costs for the home itself, the 300,000 … You didn’t lose that money. It just converted from a liquid asset to an illiquid asset. Then that asset grew at about the same rate as your investment. That part of it was awash. The part that really costs you were the one time cost to get into it, to update it, to buy your furniture, whatever, as well as the annual carrying cost.
Kevin Kroskey: That’s an important concept. A lot of people just seem to struggle with how is this actually going to happen for me and my retirement plan. How would I do it? I’ll often start with that simplified example and just say, look, maybe you have a 10,000 or $15,000 travel budget. We already have that in your plan. If you take this money out of your investments and you buy this property and the property appreciates at roughly the same rate as your investments, then you already have the travel budget that’s in there. You can do it. Your plan already was working for it. It’s just that you’re converting one asset to another for a period of time. Now there’s certainly no guarantee that your home’s going to appreciate or you don’t know what rate it’s going to appreciate at. That’s a simple working model on how to think about it.
Walter Storholt: The fourth step is to put it into your plan, see how it all works with what you’ve already got laid out and have been planning for as you’ve been going through life and just now making sure everything comes together and is nice and cohesive. Good to have all of those things figured out, obviously. Know the cash flow and put it into your plan being tips three and four on our four financial tips for snowbirding in Florida. I think I’m ready to go. Let’s do it. I’m chilly.
Kevin Kroskey: I’ll tell you what … That sounds good. Be careful about the water you go in to down there.
Walter Storholt: Just the ocean side. Not on the other side.
Kevin Kroskey: Let me go one step further from that last example. Let’s say that … Sometimes you’ll hear this. we have a client that just bought a place in Punta Gorda, Florida. They said that they actually wanted this to become more of a family home. They have two boys. The boys are starting families. They’re pretty excited about going down to Florida as well. They see it as a nice family gathering. It’s right on the water. They don’t really plan on ever selling this thing. Who knows? It’s just happening. It’s early idea stages, but let’s say that’s really the case.
Kevin Kroskey: In the prior example that I gave, you spend 300,000 on a house. You use it for 10 to 20 years and then you sell the house and then basically you get the cashback. Your net impact is really only those caring costs plus the one-time expenses that you put into it. If you’re not going to sell the home, that’s a completely different retirement plan. Now, you have that $300,000 that’s really not going to be usable from a spending standpoint to fund other lifestyle goals that you’re going to have for just your core basics expenses in retirement, your healthcare, whatever it may be. It’s not going to be there, so it’s going to put more stress on your plan. You have to really make sure that you see that … “Can I really afford to do that?” Frankly, again, these clients are mid-sixties. Who knows? This is the idea that they have. This is brand new to them. Who knows how things may change?
Kevin Kroskey: On the other hand, something that could be more common. Let’s say that the $300,000 comes out of their investment account. Maybe let’s say over time their investment accounts are hypothetically going to earn somewhere around five to 7%. If their home appreciates only at say a two or 3% rate, then the fact that it’s growing slower than their investments, there’s going to be a cost to that. They’re still going to sell it in this example, say 10 to 20 years down the road, but that $300,000 is going to be growing at a slower rate. They’re going to be … We call that an opportunity cost. They’re not going to have as much wealth as if they had just left the money invested, which again is completely fine. Retirement planning certainly isn’t just about seeing how much money you have. It’s about having the things in life that are important to you and having those experiences and making sure that your basic needs are met and all that good stuff.
Kevin Kroskey: However, this is something that you at least have to be mindful of. If your retirement plan maybe isn’t as well funded or if it’s well funded before you go ahead and add in this Florida home that we’re talking about then it’s more borderline, these are things that are really important for you to consider, consider thoughtfully and accurately a model. Then also really have a predetermined game plan about, if things don’t go as well … Maybe we planned on having this Florida home forever or at least you know well into our eighties but we feel pretty confident that we can at least do it for 10 years. Again, that annual planning, that annual updating of your financial plan, making sure that you’re staying on track, doing the tax planning, doing the investment planning, you name it, doing it all that you need to do to make sure that you’re going to stay on track and do the things that you want to do.
Kevin Kroskey: Then if you find that you’re going to have to cut it short, you have that predetermined plan. You’ve prioritized your needs over your wants and over your wishes. For most people, a Florida home or a second home, in general, is certainly more of a nice to have, but not necessarily a need to have. You got to understand the cash flow, but then you need to really put into your plan and then see how that works out and shakes out and have that predetermined plan going in about, how’s this going to work? If it doesn’t work out, what am I going to do in response to make sure that my basic needs are going to be met and my money’s going to last at least a little bit longer than I do?
Walter Storholt: This is helpful information on today’s show, Kevin. I know we’re going to do some more episodes about snowbirding in Florida and snowbirding in general, just to talk about some of the other nuances. If somebody wants more information now, what can they do to maybe get their hands on some to find out a little bit more about these different layers that should be considered when it comes to snowbirding and Florida and beyond?
Kevin Kroskey: Sure. I would say a good next step for pretty much most anybody listening to this is … I ended up writing a guide. It’s called the Ohioans Guide to Snowbirding in Florida. Certainly, I’m an Ohioan as well as a Florida snowbird. I can’t actually say I’m an Ohioan anymore. I’ve legally changed my domicile to Florida.
Walter Storholt: You’re a Floridian.
Kevin Kroskey: This is a bit of a teaser, I guess going into the next one. I wrote this guide, but there’s a lot of details that go into it. Again, saying, if you’re just out of the state for six months, then you’re fine. That’s not true. The states need money if you’re in these states that … Particularly with tax reform, some of the higher income tax states, there are more people that are actually flocking to Florida and other low or no-tax states. These states are getting more aggressive in going back and trying to claim some money from higher-income people that are doing that.
Kevin Kroskey: I wrote this guide. It walks you through it. I’ve had to figure it out myself. After I figured it out myself and then helped several other clients doing it, I just put it in a guide form. If anybody wants that guide, you can just visit our website. There’s a contact page there. Then just go ahead and let us know that you’re requesting the Ohioans Guide to Snowboarding and Florida and we’d be happy to share that with you.
Walter Storholt: We’ll put a link to the contact page there in the description of today’s show notes as well. Whatever app you’re using to listen to today’s show, if you’re not already on the website, there’s a convenient link for you. Just check the show notes or the description of today’s show and we’ll link you out to how to get that Guide to Snowbirding in Florida, specifically for Ohioans and covering some of the rules and regulations and details therein. We’re also going to dive deeper into that conversation as we teased a little bit earlier in the show on the next episode of Retire Smarter, so come back and join us for a continuation of this conversation about snowbirding in Florida. That’s helpful. Thanks for the four tips, Kevin, and a happy new year to you as well. We’ll look forward to another great episode around the corner.
Kevin Kroskey: Thank you, Walter.
Walter Storholt: All right, take care. That’s Kevin Kroskey. I’m Walter Storholt. We’ll look forward to talking to you next time. Right-back here on Retire Smarter.
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