One of the biggest choices you’ll ever have to make is deciding on the best place to retire. The state you choose will play a major role in your quality of life during your golden years. Additionally, it may alter the amount of time your existing retirement savings will cover. While New Mexico may not be a conventional destination. The Land of Enchantment does have a ton to offer retirees. Plus, it’s more affordable than many other states. Which is something that could be crucial for budget-conscious seniors. If you’re wondering what it would take to retire well in New Mexico. Here’s everything you need to know.
Cost of Living
Taking a look at a state’s cost of living is a great starting point when you’re trying to decide which is the best place to retire. Cost of living scores give you a solid idea about a state’s affordability. Not only can you compare the metrics to the national average with ease. You can also use the scores to determine if one state is a better fit for you than another.
As a quick overview of how the scores work. It’s important to understand that the national average is permanently and forever set at 100. If any state ends up with a score below 100. This means it is costs less there than the national average. For scores above 100. The state is more expensive than average.
New Mexico has an overall cost of living score of 88.7. That makes the Land of Enchantment one of the most affordable states in the nation.
When it comes to common spending categories. New Mexico does well across the board. Groceries and utilities are generally viewed as affordable. The same goes for transportation and healthcare.
Additionally, most would consider New Mexico’s housing costs quite reasonable. The median home value in New Mexico is $224,374. That makes it $41,730 lower than the national average, which sits at $266,104.
Cost of living isn’t the only metric you need to examine when choosing a retirement destination. Looking at a state’s tax rates is also a smart move.
The amount of money you’ll owe in taxes has a major impact on your overall budget. When tax rates are high. That can create a substantial financial burden that could alter your quality of life. With lower tax rates, less of your savings needs to go to that cost. Thus, allowing you to spend more on your needs and wants instead.
New Mexico does have a state income tax. Like the federal tax system, the Land of Enchantment uses brackets. Depending on your income level. Your tax rate can be as low as 1.7 percent or as high as 4.9 percent.
However, for 2021 taxes, a new bracket is being introduced. High earners – individuals who have income above $210,000 and couples that file jointly with income above $315,000 – will be subject to a 5.9 percent tax rate.
Retirement Income Is Taxed
It’s important to note that New Mexico does tax retirement income, including Social Security. However, many lower-income seniors can qualify for a deduction that reduces this overall tax burden. The income tax break can reduce taxable income by up to $8,000. Additionally, the Land of Enchantment offers exemptions and credits for qualifying medical expenses, the value of which depends on the total amount paid and whether the costs were unreimbursed or uncompensated.
One interesting tidbit about New Mexico is that anyone aged 100 or older who aren’t classified as someone’s dependent is actually exempt from all New Mexico personal income taxes. That exemption applies regardless of the person’s income level.
New Mexico does have a sales tax as well. The base state sales tax is set at 5.125 percent. However, cities and counties can levy additional taxes, pushing some local rates above 9 percent.
New Mexico does offer some property taxes breaks and programs that can also help seniors. For example, the property valuation freeze can make homeownership more affordable for low-income retirees who are at least 65 years old.
Part-Time Job Opportunities
For many seniors, retirement isn’t a time where they completely leave the workforce. Instead, transitioning into a new part-time opportunity is incredibly common.
At times, a part-time job is a financial must. It allows any retirement savings to last longer as that income is bolstered by traditional wages or freelance contracts. For others, working is a way to stay active physically, mentally, or both. It can also provide a much-needed social component.
When it comes to part-time jobs in New Mexico, positions are often reasonably available. While unemployment rates pushed up during COVID-19, reaching as high as 12.7 percent in July 2020, the rate is now declining.
As of November 2020, the unemployment rate in New Mexico was back down to 7.5 percent. Now, this is still a far cry from the pre-COVID rate of 4.8 percent, and it is also above the national average for that period, which came in at 6.7 percent. However, it shows the rate moving in the right direction.
Still, retirees may want to prepare for some potential challenges if they head to New Mexico during the first half of 2021. The COVID-19 pandemic situation is still incredibly fluid, and circumstances could change unexpectedly. As a result, it may be better to assume that finding a part-time job right away won’t be easy and plan on initially relying on savings until the pandemic resolves.
Best Cities for Retirees in New Mexico
When you’re planning your retirement, the city you select matters. In most cases, the town has a major impact on your overall quality of life, especially when it comes to accessing critical amenities. Plus, every city has a unique vibe, and some may better suit your preferences than others.
Ultimately, New Mexico has plenty of great cities for retirees. Here are a few you may want to start with if you aren’t sure which ones to consider.
For some retirees, Taos may be the perfect destination. It’s near the Rio Grande Gorge, so the area has a lot to offer when it comes to outdoor recreation. Plus, it’s brimming with amenities and has a sizable senior population, both of which may improve your quality of life.
More Affordable Cities
If you’re looking for one of the more affordable cities, Placitas might be a great option. Its tax rate is a bit lower, so less of your money will need to go toward those expenses. Additionally, the city is near Albuquerque, giving you quick access to a larger metro area.
While Silver City is considered a college town, it can still be a great option for retirees. There’s a vibrancy here that many seniors would appreciate, as well as a stellar arts and music scene.
If you’d prefer a larger city, Santa Fe is a solid choice. New Mexico’s capital has plenty to offer, including a lot of amenities and entertainment options. It’s also a popular tourist destination, so it may be easier to convince family and friends to head out for a visit.
How Much Money You Need to Retire Well in New Mexico
Overall, New Mexico’s cost of living is fairly reasonable. As a result, you can retire comfortably even if you don’t have access to a ton of retirement income every year. This is especially true if you select cities that come in below the state’s cost of living averages, allowing you to spend even less.
Typically, if you can access around $55,276 a year in retirement income, you can retire well in New Mexico. You’ll be able to cover all of your needs without much issue, providing you with plenty of peace of mind. Plus, many of your wants are potentially affordable, too, ensuring you can have a kind of retirement that’s at least close to – if not an exact match to – what you envisioned.
Do you know of any other tips that can make it possible for someone to retire well in New Mexico? Share your thoughts in the comments below.
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