MONEY real estate

Best Places to Retire

Love the culture and excitement of urban life, but loathe the congestion and cost? One of these ‘second cities’ could be your first-choice retirement spot.

If the thought of retiring to a sleepy beach town or country hamlet bores you silly, you’re not alone. Increasingly, retirees are “interested in urban center communities,” says John McIlwain, senior fellow at the Urban Land Institute. “They don’t want to be isolated out in the suburbs.” It’s not surprising that people want to spend their post-work years surrounded by the arts, cutting-edge health care, and diverse neighbors, but the cons of urban living (like cost) can be daunting. So we set out to find places that won’t ding your nest egg with high taxes and nosebleed prices, yet still have great attractions and plenty of your peers. Here are five affordable small cities you may one day want to call home.

  • Boise, Idaho

    © imagebroker / Alamy

    Moving to a mountain town means easy access to skiing, hiking, golf, fly-fishing, and more. Unfortunately, it also usually means jaw-dropping home prices, a dinky airport, limited health care, and tourists galore. Not in Boise.

    Yes, locals here can ski at Bogus Basin 16 miles from downtown, stroll or bike 85 miles of trails, and paddle or fish on the Boise River, which runs through town. But they’ll also find low taxes and affordable homes.

    Plus, Boise has become a nucleus of culture and health care. Saint Alphonsus Regional Medical Center is ranked in the top 5% of hospitals nationwide for clinical performance.

    Where to live

    North and East of downtown: Prices in the city center are steep, so buyers should concentrate on the surrounding neighborhoods, says Boise real estate broker Jason G. Smith. “Traffic isn’t an issue,” he says. “So you don’t need to be right downtown to enjoy it.”

    You’ll find two-bedroom condos or small single-family houses priced at about $300,000 in the North End.
    Southeast and Northwest Boise: On a tighter budget? Head to these neighborhoods (located about 10 minutes from the city center) for homes starting around $200,000.

    What to do

    Outdoors: Walk along the Boise River Greenbelt or explore the trails winding out of Hull’s Gulch or Camel’s Back Park. The city has two open-air Saturday markets, which are a great place to find produce and bump into friends.
    Art: The Boise Art Museum has 3,000 permanent works and presents diverse exhibitions ranging from site-specific installations to collections of ancient artifacts.
    Performance: Grab tickets for the opera, philharmonic, or ballet. Boise State’s Morrison Center hosts national tours of Broadway shows, stand-up comedy, and live music, while the Shakespeare Festival fills a 770-seat outdoor amphitheater.

    And there’s more to come: Construction is under way for a new $70 million, 65,000-square-foot cultural center, slated to open in 2015.

    Taxes

    Retirement benefits are taxed, though some types of pensions qualify for a deduction. There is no inheritance or estate tax.

    • Income tax: Highest is 7.4%
    • Sales tax: 6%
    • Median property tax: $1,230
  • Spokane, Wash.

    © Andre Jenny / Alamy

    Unlike gloomy Seattle, Spokane basks in about 260 days of sunshine a year. Want to get out and soak up that vitamin D? The Spokane area has 76 lakes and five ski resorts, plus plenty of golf courses and wineries.

    The city has urban appeal too, with a downtown that’s become a destination for retirees looking to trade high maintenance homes for condos that are walking distance from restaurants, art galleries, and theaters.

    Spokane residents do pay a hefty 8.7% sales tax, but the state has no income tax.

MONEY Kids and Money

How to Tell Your Kid You’re Cutting Him Off Financially

At some point, you need to have "the Talk." Here's what to say.

Nearly half of middle-aged adults gave financial support to a grown child last year, according to the Pew Research Center.

Whether you’re providing room and board, covering insurance costs, or writing regular checks, you may be doing your child — not to mention yourself — a disservice.

“At some point parents have to help their kids spread their wings, even if it means letting them fail,” says Steve Aucamp, a financial adviser in Washington, D.C.

These cues can help you nudge your child off the dole.

The Ground Rules

Lose the guilt. “Wanting your child to be financially independent isn’t a bad thing,” says Susan Ende, co-author of How to Raise Your Adult Children.

Make a plan. Most experts say it’s best to wean your kids rather than cut them off cold turkey. So think through your terms before broaching the topic.

Pick your moment. Try to time the talk with a life event, like graduation or a new job, says family dynamics expert Ruth Nemzoff.

Not possible? Schedule a chat rather than waiting until your kid needs cash.

When You’re Face to Face …

1. Opening gambit: “We’re glad we were able to help you out these past few years, but we think you’re capable of taking more responsibility now.”

Why it works: “You’re framing this as a positive step forward, not a guilt trip,” says Nemzoff, author of Don’t Bite Your Tongue: How to Foster Rewarding Relationships With Your Adult Children.

2. Explain yourself: “You kids have been our priority for years. Now we need to focus on saving for our retirement. And we also want you to become financially independent adults.”

Why it works: Help your kids understand the big picture, and they’ll be more likely to accept the new reality, says Aucamp. So make sure they know why you’re unable to keep supporting them and that your decision is not a punishment.

3. Lay out the terms: “We think it’s time for you to pay your own rent. To help you get set up, we’ll cover the next three months and match what you save up to $1,000.”

Why it works: You’re spelling out exactly what you can offer in the short term and your expectations for the long term. This approach offers support — and incentive — while holding your kid accountable.

If Junior protests that he can’t swing it? Assuming your terms were reasonable, don’t waver.

4. Give the gift of empathy: “We know this won’t be easy. We’re here whenever you need to talk.”

Why it works: “Make it clear that just because you’re cutting off the money doesn’t mean you’re cutting off the relationship,” Nemzoff says. Instead of cash, hand out advice when asked. For example, you can suggest resources to find a roommate to split the rent or go with your child to look at cheaper digs.

5. Underscore the deadline: “We think three months is ample time to set up a cash cushion. So after Nov.1, you’re on your own.”

Why it works: “People rise to the occasion when they have to,” says Ende.

Of course, deadlines — just like plans — are good only if you stick to them. “If your child comes back home and you swoop in with a safety net,” she adds, “you’ll only have to start the process over.”

MONEY

A Couple’s 5-Year Plan to Pay off $93,600 in Debt

Larry and Lynn Mantanona, 56 and 54, Fairview, Ore. photo: miller mobley

When it comes to family, Lynn and Larry Mantanona believe in sparing no expense. That means frequent travels to Larry’s native Guam for weddings, funerals, and other big family events.

They had no qualms about taking a $12,000 loan for college tuition for Savanah, 22, and borrowing $20,000 for wedding expenses for Chanelle, 28.

“We want to do for our daughters what our parents couldn’t do for us,” says Lynn.

Now the couple find themselves in a difficult situation. The Mantanonas owe over $90,000 on various credit cards and personal loans and can’t seem to whittle the debt down.

“We aggressively make payments, but then something comes up, and we have no savings to fall back on,” says Lynn. They also owe more on their house than it’s worth.

On the upside: The couple have a decent amount of retirement savings, thanks to Lynn’s longtime habit of putting 5% of her salary in her 401(k). She’ll also qualify for a monthly pension of $1,300 at age 62.

Still, the couple feel behind. “Lynn deserves to retire in 10 years,” says Larry. “I’ll keep working if I have to.”

Occupations: Catering manager,IT manager

Goals: Pay off debt, retire in 10 years

Total income: $152,000

Retirement savings: $330,000

THE PROBLEM

The Mantanonas clearly need to axe the debt, says Marc Russell, an adviser with Convergent Wealth Advisors in Los Angeles. Still, they need to keep saving for retirement. “It’s about weighing competing priorities,” Russell says. With the right plan, they can get there.

THE ADVICE

Make a repayment plan. In early 2013, Lynn will receive a $14,000 tax-free gift from her mother. That money can nearly wipe out their credit card debt.

By temporarily cutting Lynn’s retirement contributions to 3% — enough to still get the full company match — they’ll free enough cash to make a big dent in their highest-rate debt within a year. Then they can focus on other loans.

Check for money leaks. After closely examining the Mantanonas’ budget, Russell thinks they can carve out $200 a month to save in a money-market account earmarked for emergencies and future expenses.

As they pay their debts, they should aim to build the emergency fund to six months’ worth of living expenses and save more aggressively for retirement.

Move into a target-date fund. Right now Lynn’s retirement plan is mostly low-yielding government bonds.

Russell suggests she shift into the low-fee 2020 target-date fund in her plan, which would bring her fixed-income allocation to about 46%, or half what it is now.

Assuming the couple save an additional $12,000 a year for retirement beginning in 2018, they should hit $600,000 in savings in 10 years — not what they need to fully retire, but not far off.

Says Lynn: “At least that will bring us to a manageable situation.”

Would you like a free financial makeover in Money magazine? E-mail makeover@moneymail.com for more information.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser