6 Ways to Make a Snowbird Retirement Affordable

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When the frosts roll in and a chill begins to descend, that’s the signal for many retirees to begin their annual escape to warmer climates. This yearly migration that people make to spend the colder months in sun-kissed destinations has led to them being referred to as "snowbirds."

Though joining them might seem like an expensive proposition, you can actually end up financially ahead. Depending on the location you choose and how long you spend there each year, you may be able to reduce your income tax bill. And if you own property, there are ways of using that to your financial advantage, too. Here are six tips for affording the snowbird retirement lifestyle.

1. Head overseas

One traditional snowbird move is to head to a southern state like Florida, Texas, or Arizona in search of warmer weather. But an alternative is to look a bit farther afield and consider easy-to-reach destinations overseas. By spending your winters abroad in countries where your dollar stretches a lot further, it’s possible to reduce your costs significantly for the period you’re away.

Popular retirement hot spots include Mexico, Costa Rica, Nicaragua, Panama, and Ecuador, which generally have good climates year-round. Many also have established retirement and snowbird communities you can join while you’re there. (See also: 5 Countries Where You Can Retire for $1,000 a Month)

2. Take advantage of any tax opportunities

One of the reasons that some states have become particularly popular with snowbirds is because of their favorable tax regulations. By switching your residency to a no-tax state like Florida or Texas, you could save on state taxes. But you need to inform yourself about the laws surrounding tax residency in both states in which you reside.

For example, Florida requires you to spend 183 days a year in-state in order to be considered a resident. But if your other home is in a high-tax state, that state probably doesn’t want to lose you as a taxpayer. So you may also need to establish that you’ve moved your bank accounts, driver's license, and voting registration to Florida. Or, you may need to prove that your bigger home is in Florida, or that you derive more income from the Sunshine State. All of these are ways of proving that your main domicile is in Florida.

If you’re audited and tax officials deem you have not been paying the appropriate state taxes, you could be subject to back taxes, plus interest and penalties. It’s really not worth the risk, so be sure you’re up to speed on residency tax laws.

3. Rent out your property

Many snowbirds opt to buy a property in their winter location and maintain their old property in the place where they will spend their summers. If you own property in either location, it may be possible to make money by renting it out when you’re not there.

Though a yearlong lease won’t be an option for you, there are other ways to rent out your property. You can offer short-term rentals through sites such as Airbnb and HomeAway, and hire a property manager to oversee cleaning and maintenance. Depending on the location and style of your home, you may be able to make a significant amount in rental income.

If you’re using multiple platforms to rent out your properties, you can use services like Guesty to manage and keep track of the bookings, analytics, and communications. (See also: 5 Costly Pitfalls of Hosting on Airbnb)

4. Pick up a side hustle

Starting a new career when you’ve just retired may not be quite what you had in mind, but I’m not talking about a full-time job. If you can find something part-time that will supplement your income, it could make a big difference in your quality of life or provide you with any extra funds you may require to make your snowbird dream a reality. (See also: 6 Great Retirement Jobs)

One option is seasonal work during the summer and winter holidays. You might even be able to find part-time positions in both locations that are recurring each year, providing you with some stability and a regular income. Bear in mind that any extra income you earn through work will affect your tax bill, so you’ll have to figure out whether it’s beneficial overall. (See also: 9 Great Jobs for Snowbirds)

5. Downsize your home

Many retirees still live in homes where they brought up children, and those houses are now far larger than they need. It may be possible to downsize, purchase two smaller properties, one in each location, and perhaps even make a little extra on top.

Even if your intention is to rent in one of the locations, downsizing and selling your property may still be an idea worth considering if it would eliminate an outstanding mortgage. A smaller living space could also save you on upkeep and maintenance costs, and mean lower utilities bills as well. (See also: 12 Money Moves to Make the Moment You Decide to Retire)

6. Time it right

Many snowbirds drive their cars or recreational vehicles from one location to another. But some fly to their winter destination, especially if it’s overseas. If you’re flying, it’s best to allow yourself some flexibility around exactly when you make the move so that you can save on airfare. Try to avoid flying at peak times like school breaks and religious holidays, and plan ahead as far in advance as possible. (See also: 10 Flight Booking Hacks to Save You Hundreds)

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