To create the list, the editors used 5 factors:  Fiscal health, property taxes, income taxes, cost of living, and climate. An interesting feature, however, is that you can reorder the list yourself by eliminating criteria that are not important to you.

My personal belief is that each of the 5 criteria used are important to a happy retirement.

Two states had a numerical tie as the worst states in which to retire:  Connecticut and Illinois.

Although I think Chicago is quite livable for a large city, Illinois in general has terrible economic problems which it is trying to solve by increasing income taxes.  For example, work and investment earnings are taxed at a 5% flat rate.

Property taxes are killers in most of these states. It is miserable to think that you could pay off the mortgage on the home where you are living in retirement but still face a monthly property tax payment of $500-$1000. For example, in New Jersey just the median property tax bill is over $6500. Ouch.

Minnesota (#7 on the list) punishes retirees with bad winter weather and with no income tax exemptions for Social Security or pension income.

We are sticking with Tennessee and Kentucky, thank you!

Read the list for yourself here: Worst States to Retire 2012: Northeast and Midwest Come Up Losers.

Related posts:

1. Ranking the 50 States for Retirement 2011
2. Deciding Where to Retire: Spousal Conflicts

This list is somewhat unique because it asked the readers to rank the different retirement living factors according to their importance. According to reader preferences, in this list economics determined 47 percent of a state’s final score, its climate determined 33 percent, life expectancy determined 12 percent,  and crime was weighted at 8 percent. With economics and climate so important, you can predict that the southern states would do well.

I was somewhat surprised to see that both Kentucky and Tennessee (states where we spend our time) were ranked in the top 10. Climate and economic factors carried the day for these states.

The lowest ranked state for retirement was Maine, right below Michigan, Massachusetts and Connecticut. I wouldn’t have predicted that Maine would be the worst but the other lowest ranked states didn’t shock me at all.

What is really interesting is how radically the rankings changed from 2010. This is because the readers – not the editors – determined which retirement living factors were most important to them. If you let the editors decide what is important, they can create some crazy rankings about retirement locations. One example is this story, where Milwaukee, Wisconsin and Newark, New Jersey made a top ten retirement city list. Seriously – Newark?

Here is the link to the complete list. Best States for Retirement 2011: All 50 States.

If you want more detail about the top ten retirement states, read this article also.

So how does your state rank for retirement? Do you agree?

Related posts:

1. More Opinions on the Worst States to Retire
2. Retirement Locations, Weather and Environmental Hazards

Weather is certainly influential with a lot of retirees. That’s why Florida and Arizona are jam-packed with retirement communities filled with baby boomers who are fed up with cold and snow.

I would hesitate to live in some parts of California because of earthquake threats, even if the taxes were tolerable.  California has also experienced many mudslides and forest fire events in recent years which have affected residential areas.

I also want nothing to do with communities along the Gulf and Atlantic coasts that are regular hurricane targets.

Here in middle Tennessee we are relatively fortunate. We have a mostly mild climate and no hurricanes. The New Madrid Seismic zone runs through West Tennessee so a Memphis earthquake disaster is not out of the question. We did experience a 200 year flood along the Cumberland River in 2010 but not precisely where I work or live. Tornadoes are probably the most common weather hazard but they are ubiquitous throughout the heartland.

I suppose the bottom line for me is that I would never want to live in California or own property in a hurricane zone or along a flood-prone river. Beyond that, where to retire is more about the benefits of the location than it is about the environmental risks.

Will you consider weather and other environmental hazards and events in your decision about where to retire? Which are the most important to you?

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1. Don’t be in a hurry.  Some vehicles are always popular and are certain to find buyers if the price is close to reasonable. Other vehicles require more of a “niche” buyer. Our vehicle was more in the “niche” category. It was an older (1999) premier brand (Lexus) that combined high performance (not a gas saver) with luxury features. I knew it would take time to find the right buyer who valued vehicles like this, even in our MSA with a population of 1 million plus. In a smaller market, eBay would probably be a better selling channel compared to Craigslist. I was almost ready to put the car on eBay myself.

2. Put photos and lots of detail in your ad.  I learned from my earlier sales that I did not enjoy answering endless questions from buyers/lookers about the item for sale. With this vehicle, I cleaned the car inside and out, polished it up, and took 4 high quality photos (the maximum allowed on craigslist). I then crammed the text of my ad with the history of the car, where it was garaged, how it was maintained, its physical condition , every feature it had, and why I was selling it. This greatly reduced the amount of time I had to spend answering questions. Instead, most of my inquiries were “do you still have it” and “when can I see it?”

2. Test your pricing.  I first put the car on Craigslist a month ago. I priced it at the high end of retail book value ($9,100). I had almost no activity in response except for the shopping trolls (more on that later). Ten days later I dropped the price to what I believed would be another resistance point, $8500.  I had one looker who offered me $5000. I politely rejected that with no counter-offer. Two days ago, I moved the asking price to $7950 and again renewed the ad (which pushes it to the top of the list). This generated a lot of activity.

3.  Ignore/blow-off the shopping trolls and email negotiators.  Apparently there are folks out there who think they can solicit better prices by making low-ball offers or asking “what’s the lowest you will take for the car” without even seeing the car. Apparently, there are also sellers who lack the confidence to blow these people off. I had one guy email me yesterday with $4500 offer – cash! – if I didn’t sell it before my deadline. First, what did he think I would take from other buyers other than cash? Second, I had no deadline. I emailed him this short response: “Not gonna happen.”  To other trolls I just said: “I only negotiate in person.”  Another prospect wanted me to drive the car to his brother’s shop to look at. I of course declined. Apart from the safety concerns, I would not want to negotiate on the buyer’s home turf.

4. Don’t negotiate against yourself.  I had a prospective buyer drive the car on Sunday. He was there with his two brothers. Each took a turn asking me “what’s the lowest price you will accept.” I kept answering “I haven’t decided that but if you make me an offer, I’ll let you know if it’s high enough.” Finally, the guy offered my $65oo. I said no, but after thinking for a minute, I countered at $7400. He then told me that his offer was firm. I said that’s too bad because he was turning down a good price on a good car. I told him I had two other buyers wanting to see the car. They left.

5. Establish trust with your buyers. With each buyer, I was quick to disclose the one item that I knew was wrong with the car (missing pixels on the audio display). I never said there was nothing else wrong, only that I didn’t know of anything else. (A true statement.)

6. Go along on the test drive.  Even if you trust a prospect not to steal your car, the test drive gives you more opportunity to highlight the selling points of the car. Our car had a lot of small luxury features that were not readily apparent in a short test drive. I made sure the buyer knew about them.

7. Have your documentation ready. When you get an eager buyer, make sure you can close the deal quickly by having a clean title in the proper name, etc. Last evening, a single baby boomer woman drove the car for 5 minutes and offered full asking price on the spot. She was tired of the minivan/SUV experience and was ready for something radically different but affordable. Our car filled that need perfectly. She offered me a personal check right then or a cashier’s check today. I wanted the certainty of a bank check so I agreed to meet her at her bank first thing this  morning. I wanted to meet at the bank so I could confirm that the check was genuine.

8. Use a Bill of Sale. Although a signed title is adequate to convey ownership in most states, I recommend that you also provide a Bill of Sale, to be signed by both seller and buyer. The Bill of Sale should contain clear language stating that the car is being sold “as-is” with no express or implied warranties as to the condition of the vehicle. This protects you against legal claims if the transmission falls out of the car the day after you sell it. A frustrated buyer may claim that you stated the car was in “perfect condition.” A judge might believe the buyer and rule that you made a verbal warranty to the buyer. Not good.

Car selling and selling in general on craigslist can really help with your downsizing. I know it has helped us.

Do any of you have other tips to share?

Related posts:

1. Downsizing Through Craigslist

So far, I am quite please with the results. In less than a week, we sold a treadmill, a large desk, a large bookcase, an old audio cabinet, and a bicycle. In each case, the first looker became the buyer. I priced the items aggressively for quick sale because I didn’t want to waste time on emails, phone calls, and showings to people who enjoy negotiating. I enjoy negotiating sometimes, but not when we are merely eliminating stuff that has no value to us because it is just taking up space.

Before posting our Craigslist ads, I studied other ads for similar products. There were two characteristics of many of those other ads that I believed were counter-productive to a good selling strategy. First, the photos of the item for sale were either non-existent or of very poor quality. I took high quality photos and in most cases, posted four photos (different views) of each item. (Four is the Craigslist limit.)

The other problem with most Craigslist ads is that the descriptions of most items bordered on the worthless. There was not enough  information about the features and condition of the items. There is no excuse for this because the Craigslist ads are free and allow you to post lots of info about your items for sale.

Providing a lot of detail in your Craigslist ads will, in my opinion, minimize the frequency and duration of communications that you will have with prospective buyers. You want buyers to know as much about the item as possible from your ads so that they don’t have to ask you. Downsizing is something you do to make your life easier. Therefore, you should design your downsizing strategies (and your Craigslist ads) for that purpose.

There a few things I’ve posted on Craigslist that have not attracted much attention. Those will become donated items. One reasonable attempt at selling is all I intend to make, then the stuff will be eliminated by any means possible. Seeing the newly opened spaces in our home and garage is a reward unto itself.

We have other stuff (mostly collectibles belonging to my wife) that will need to go on eBay. More about that later.

Have any of you  boomers used Craigslist as part of your downsizing strategy?

Related posts:

1. Craigslist Car Selling Tips

I’m not certain I agree with the assessment that the eight vacation homes highlighted by CNN are bargains.

Let’s first start with these three financial principles that I espouse for those who are on a retirement glide path and considering purchasing a vacation home:

1. Do not buy a vacation (or other second home) just because it appears to be a “bargain.” (More about this later.)

2. Do not buy a second home just for vacations. If you will use it a lot when you are retired, that’s a different story.

3. Do not buy a second home if you must rent it to make it affordable. That’s just too much risk to take on when you are close to retirement.

I speak from experience. We bought our second home ( a lakefront property) eight years ago. When we purchased it, we envisioned using it for vacations and weekend getaways now and as at least a part-time residence when we retire. That is still our plan.  Therefore, several years ago we paid off the mortgage on our second home. We have never rented it. So far, so good with our plan.

So what about the “8 great vacation homes” featured by CNN/Money? Three (in Massachusetts, New Jersey, and Texas are well over $1 million asking price, so those don’t even count as second homes in my book. They are extravagances for the very wealthy.

Five are on the ocean which is nice except I think lake living is better for a retiree.

While that cottage in Myrtle Beack looks like a deal at under $150k, note that the house sits on a land lease at $8200/year. That’ s no bargain at all.

The listing that is closest to my heart is the chalet-style home on a small lake in Kentucky. I’m partial to that style because our second home is on a very large lake in Kentucky (Lake Barkley). There are some serious deals to be had right now on Kentucky lake front property. Kentucky is also friendly to retirees plus the weather is moderate.

Even if you are not in a position to buy a second home bargain right now, it can’t hurt to look!

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The author of the article and her husband were not even close to being on the same page. She wants to travel, including having a base of operations in a foreign country. He wants an apartment in New York, close to the library. Indeed, he says “you can travel without me, sweetie.”

According to a survey discussed in the article, 42% of 50-year old’s plan to move when they retire. The number one reason given (81%) was for a lower cost of living.

The problem is that couples do not discuss the “where should we retire” issue early enough. If conflicts become apparent, it takes time to explore and eliminate them. The alternative is that one of the spouses feels bullied. Or, they both compromise and neither is truly content with the location decision.

I suspect that a lot of us have dreams or fantasies about retirement in a place we have never lived before. These fantasies can include different types of destinations, such as golf communities, beach resort communities, or even living abroad. Conversely, some boomers can’t imagine leaving where they are, preferring the comfort that familiarity brings.

In an ideal world, the different interests of both spouses can be accommodated in a single location and/or by living in different regions at different times of the year. Otherwise, there should be a defined process for resolving spousal conflicts in retirement locations. Agreeing to test drive both places would be a start. Another option would be to explore the entire retirement scenario as a couple by attending a program such as those offered by the Center for Creative Retirement at UNC-Asheville.

Bottom line advice: Start talking – now.

Here is a link to the complete article which is definitely worth a read: Deciding Where to Retire

Related posts:

1. More Opinions on the Worst States to Retire

There are several important factors to consider when deciding to purchase a different home in which you plan to retire. I hope I am right on some of these, because in the past 8 years we have purchased two homes that we are using now and plan to use in retirement.

What we have done appears to be part of a baby boomer trend. Consider this data from a recent Smart Money article:

In retiree hot spots Palm Beach, Fla., and Hilton Head, S.C., home sales jumped 39.3% and 13.6%, respectively, in 2009. Sales of vacation homes are also on the rise. In 2009, sales nationwide increased 7.9%, according to a 2010 study by the National Association of Realtors. More than one in four vacation-home buyers (54% of whom were 45 or older) plans to use the property as a primary residence in the future, the NAR study showed.

Some issues to consider:

1. Does the geographic location make sense? If the retirement home is not near where you live now, it may be smarter to rent before you buy, to avoid an expensive mistake. Can you use it as a vacation home before you retire? Also, if being near your adult children is important, do you know now where they will be when you retire?

2. Can you weather the storm of long term ownership? The times when real estate was sure to appreciate year after year are gone, perhaps forever. Making a quick exit if money gets tight may not be possible. Thus, a pre-retirement purchase of a retirement home is a long-term decision.

3. Do you really understand market values and trends? Home prices have fallen in most areas, and dramatically so in places considered prime retirement destinations, such as Florida, Arizona, and Nevada. Some experts think that prices will begin rising in later this year in places like Boulder, Colo., Bellingham, Wash., and Napa, Calif.  On the other hand, prices in cities in Arizona and Florida where foreclosures are plentiful may continue to fall.

4. Have you decided on the type of housing? Will your retirement home mean downsizing? Detached single family home? Town home? Condo?  This may present another “try before you buy” strategy.

I think the process of thinking about and shopping for a retirement home brings an exciting reality to your overall retirement plan. Go for it! Even if you can’t pull it off now, the attempt may motivate you to make other changes in your financial planning and lifestyle that will make it possible later, before real estate values escalate.

Here is a link to the Smart Money article: Is Now a Good Time to Buy a Retirement Home?

Related posts:

1. Vacation Home Bargains?

The mortgage lending problem for condominiums begins with the principle that most conventional mortgages are sold on the secondary market and/or may be insured by the F.H.A. This means that no matter who you are talking to about a loan for your condo purchase, that lender or broker will likely be subject to lending standards imposed by Fannie Mae and/or Freddie Mac and/or the F.H.A. Because of the mortgage default and foreclosure crisis of the past few years, those organizations have tightened their lending guidelines, particularly for the hard-hit condo market.

Let’s review some of these new guidelines:

• Fannie Mae ordinarily will not buy a condo loan from a lender if more than 15 percent of the owners in the condo development are 30 days late on monthly maintenance fees.
• Condominium associations must set aside 10 percent of their budgets for maintenance and reserves.
• New condo developments (like ours) are ineligible for Fannie Mae or Freddie Mac financing unless 70 percent of the units have either sold or are under contract.
• The F.H.A. requires that at least 50 percent of a building’s units belong to owners who occupy their units, and that no more than 10 percent are owned by a single investor.

Waivers of these requirements can be sought but I wouldn’t hold my breath.

We were aware when we bought our condo that obtaining conventional financing could be a problem, because we were the very first buyers in the very first condo building in our development. We also knew that we would not need a conventional loan. Instead, we arranged with the community bank that financed the entire project for the developer to give us a 20 year loan with a three-year balloon payment. This loan is kept in-house by the bank so the guidelines summarized above did not apply. Our plan is to pay the condo loan off in full before the balloon payment is due, when we sell our house here in Nashville.

A smart condominium developer will arrange for buyer financing ahead of time so that these new lending standards don’t cause trouble. Prospective condo buyers should be beware, however, and make sure that they have a well-crafted financing contingency in their purchase contract.

Here is a link to a longer article discussing these new condo lending standards: Stricter Lending Guidelines for Condos

Related posts:

1. Reverse Mortgage Risks and Benefits in a Nutshell
2. Ranking the 50 States for Retirement 2011

Forbes researched and assembled the rankings based by studying all cities (MSAs actually) having populations of at least 100,000. Each metro area was then ranked based on local costs of a consumer goods and services, including groceries, health care and transportation.  Forbes also assessed monthly housing costs relative to household income.  The unemployment rate was also considered to exclude areas that became affordable because their economies were depressed.

Here are the top ten most affordable cities based on averaging these criteria:

I was glad to see our current home base – Nashville – on the list.  I was also not surprised to see Louisville and Birmingham.

On the other hand, I did not expect to see Pittsburgh, Buffalo and Rochester evaluated as being affordable. According to Forbes, their economies are “post-industrial” success stores. I do not believe these rankings considered taxes (and clearly not weather) so for retirees, these rust belt cities would not rate highly.

Also, retirement does not necessarily mean living in a major metropolitan area, but I expect that nearby smaller towns would have similar costs of living.  I enjoy rural living. (See Retiring in a Small Town or Rural Area.)

What are your thoughts on this list?

Link to Forbes article: Americas Most Affordable Cities

Related posts:

1. Ranking the 50 States for Retirement 2011
2. Deciding Where to Retire: Spousal Conflicts
3. More Opinions on the Worst States to Retire