One Move Could Boost Your Retirement Security

Moving to a more affordable neighborhood could rescue your retirement finances.

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In Pictures: 10 Places to Buy a Retirement Home for Under $100,000

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Many people who haven't saved enough to retire comfortably are contemplating working longer. But if delaying retirement isn't an option, there is another way homeowners can give their nest egg a quick and significant boost.

Selling your current home and moving to a place where housing costs considerably less can add to your retirement savings. If you currently live in a high-cost area and have built up equity in your home, selling and moving into a more affordable house can rescue your retirement finances or even raise your standard of living.

[See 10 Places to Buy a Retirement Home for Under $100,000.]

"If you are willing to make a move to a less-expensive area, the savings can be enormous," says Fred Brock, author of Retire on Less Than You Think: The New York Times Guide to Planning Your Financial Future. "There aren't many times in our lives when you can actually determine where you live on your own, and retirement is one of them."

Consider that the median home-sale price in 2010 was $635,000 in San Francisco, $457,000 in New York, and $368,000 in Washington, D.C., according to Onboard Informatics data. You could purchase a home for a fraction of these prices in Pittsburgh, Penn. ($97,900), Memphis, Tenn. ($71,000), or Port Charlotte, Fla. ($59,950).

A former business editor at the New York Times , Brock left behind the pricy city for a second career as a professor at Kansas State University in much more affordable Manhattan, Kan. "My salary in Kansas was not as big as at the New York Times , but I had more money," he says. Upon retirement, Brock further cut costs by moving to Green Valley, Ariz.

But you don't need to move halfway across the country to realize savings. "When you are in the workforce, people are willing to pay a lot of money to get closer to their job to reduce their commute. When you retire, you can move out of the area out to where you can afford it," says Bert Sperling, founder of BestPlaces.net. "Instead of living within 30 minutes of town, by moving two hours from town you can still enjoy all the amenities of a major metro area, but the house could be as little as a third or a fourth of the cost of what it was closer in. You might have a nest egg that you never even thought you had."

[ Find Your Best Place to Retire.]

Upon Albert DeCoursey's retirement from the military in 1999, he and his wife Barbara left the Chicago area behind and tried out several retirement spots in Virginia and Vermont. They eventually settled into a condo in downtown Milwaukee, a city they say has the ideal mix of low costs and plenty of amenities. "We liked Chicago, but it was a little too big and expensive for us," says Albert, 65. "Milwaukee has the lakefront and it has the cultural and medical facilities without being a big city." While the two cities are 90 miles apart, the price differential is significant. The median Chicago home sold for $235,000 in 2010, while homes sold for a median of just $97,700 in Milwaukee last year.

Many retirees are also seeking places where state and local tax rates will erode less of their spending power. Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. And New Hampshire and Tennessee tax dividend and interest income only. There are five states without a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. The tax treatment of Social Security and pension benefits also varies by state. However, it's difficult to avoid all types of taxes. "When places don't have an income tax, they make up for it in other taxes," says Brock. "They can have very high sales or property tax."

Moving to a new place to save money isn't for everyone, of course. It can be difficult to leave behind a network of friends and relatives, and give up a house with memories tucked in each crevice. And the costs of buying a new home, selling the old one, and the move itself will take a chunk of the potential profits. People already living in places with a low cost-of-living or who don't have much equity in their homes will have little to gain by moving unless they significantly downsize. It also will take a considerable amount of research to make sure a more-affordable city will meet your needs for healthcare, recreation, culture, and transportation, and have weather that suits your tastes.