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Moving to a Cheaper City Can Net You an Extra $100,000 in Retirement

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As Americans approach the age of retirement, they naturally start thinking about where they want to enjoy their golden years — perhaps somewhere that’s warm and quiet.

But relocation can also have a huge impact on your retirement planning: A new study shows that for the many older Americans who have significant equity in a home, selling and moving to a less expensive market can pay off in a big way, to the tune of hundreds of thousands of dollars.

Even though home equity is the “most prevalent and often most significant source of wealth for American households,” unlocking it is frequently overlooked in retirement planning, according to a new paper by experts at Vanguard.

By moving to a market with less expensive homes, the typical older American could net $100,000 or more that could help fund their retirement. And in areas of the country where housing prices are much less expensive, the cost of living is usually lower, so the cash you’d get from moving to a more affordable home will likely go further.

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What the research says

When Americans 60 and older relocate, about 60% of them go somewhere with cheaper homes, the authors’ analysis of 2019 U.S. Census data shows.

  • Among those moving to more affordable housing markets, the typical person “extracts” about $100,000 of home equity. People moving out of particularly expensive cities can get much more when they relocate.

  • The study gives an example of a 65-year-old resident of Santa Clara, California, selling the average-priced home in the county and buying an average-priced home in Merced County, which is nearby but outside the Bay Area. That swap would net about $330,000 that could be put toward retirement, assuming no mortgages are involved.

Bottom line

The strategy described in the paper, “retire and relocate,” won’t be right for everyone. But if there’s a more affordable market where you’d like to live during your post-work years, selling your home and moving could make it easier to retire earlier or more comfortably.

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Retire With Money brings the latest retirement news, insights, and advice to your inbox. Jill Cornfield has covered retirement for more than 10 years.

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