The snowbird life sounds perfect. Spend summer up north, then head somewhere warm and sunny (like a Florida beach town) when the cold rolls in. For many retirees, it is the dream.
But financial experts say even well-prepared snowbirds run into money trouble. Here are three mistakes to watch for and how to avoid them.
Surprise HOA Fees That Can Wipe You Out
A condo in a gated community might look like a smart, affordable choice for your southern base. Watch out, though. HOA fees can go far beyond the monthly amount you expect.
Russell Moran, a licensed insurance and financial specialist at Russell Moran Agency, has seen it happen. “I’ve personally seen clients in HOA communities get hit with mandatory assessments of $250,000 per unit for forced property upgrades,” he said. “That’s not a setback. That’s financial ruin.”
Moran’s advice? Consider renting in the South instead of buying. “You know exactly what you’re spending, you’re not tied to a depreciating or damaged asset, and you can walk away if the area doesn’t work out,” he said.
Getting Your State Taxes Wrong
Many snowbirds assume that spending most of their time in a low-tax state like Florida means they owe taxes there. It is not that simple.
Chad Gammon, CFP and owner of Custom Fit Financial, explains that states look at more than just day counts. If your primary doctor, accountant, and church are all back in New York, a state agency may consider you a New York resident, even if you claim Florida as home.
The financial hit can be steep. Gammon offered this example: a retiree withdraws $100,000 from a retirement account and claims Florida residency to avoid New York state taxes. If their true residency is challenged, that unpaid tax bill (plus penalties) could reach $25,000 or more.
To make the switch legitimate, Gammon says you need to do more than just spend time down south. “This can mean downsizing your home in the high tax state and changing your doctors and voter registration to the new state,” he said. “Then move heirlooms and very personal items with you to the new state.”
Picking the Wrong Medicare Plan
Medicare is already complicated. For snowbirds splitting time between two states, it gets even trickier.
Alex Langan, CIO and financial advisor at Langan Financial Group LLC, says the plan that works great in one state may leave you with limited coverage in another. “Original Medicare paired with supplemental coverage tends to travel better than most Medicare Advantage plans,” he said. “But the right answer depends on individual circumstances.”
Langan recommends sitting down with a licensed Medicare advisor before you commit to any plan. A little homework now can save a lot of headaches (and expense) later.
The snowbird lifestyle is absolutely worth pursuing. Just go in with your eyes open, and talk to a financial professional who knows the territory.