As winter approaches, you may be thinking about becoming a “snowbird” — living in a warm-weather spot during the cold months of the year and returning to your current home in a cooler climate during the heat of summer. If so, here are some important money issues to consider:
Buy or Rent?
The biggest financial decision you’ll have to make is whether to buy or rent a second place for your winter stays. Part of your decision will depend on how much time you expect to spend in each destination.
You should consider buying a home if:
- You want to take advantage of record low mortgage rates and depressed housing prices in some parts of the country.
- You want to build equity over time and potentially generate income by turning the property into a rental when you’re not using it.
- You have your heart set on a location and know you’ll want to visit there for many years.
You should consider renting a home if:
- You want to alleviate some of the concerns that come with owning a home, like maintenance, upkeep and homeowner's insurance (renter's insurance is typically less expensive than homeowner's).
- You want the freedom to move somewhere else, which you’ll be able to do once the lease is up.
Since you’ll be gone for several months at a time, it’s important to have someone looking after the home or homes you own.
You might want to hire a property manager unless you have a neighbor willing to check on the place for you. It’s easy to search online for names of property management companies, then ask them for free quotes to compare their fees.
Alternatively, you could use a professional home-watching service. A recent Wall Street Journal article said these operations typically charge $20 to $40 a week.
You will also need to hire someone to mow the lawn, water the plants and, if necessary, shovel the snow.
To prevent your home from appearing unoccupied, check with your local post office to find out if you can have your mail forwarded to your other home for an extended period of time.
If that’s not possible, either ask the post office to hold your mail while you’re away or ask a friend, family member or neighbor to pick it up regularly and send it to you.
If you subscribe to daily home delivery of a newspaper, call its customer service number, notifying the publication of your situation. The paper should be able to deliver your subscription to your other address for months at a time.
To avoid the hassle of making this call or a potential missed delivery, consider signing up for the newspaper’s electronic delivery subscription, which may save you money.
Before switching locations for the winter, call your bank and credit card issuers to tell them about your temporary move. Otherwise, if your bank or card issuer notices a lot of out-of-state transactions, it may assume someone has stolen your identity and put a temporary freeze on your accounts.
A good way to avoid late bill payments is to sign up for online services from your bank, credit card companies, utilities and cable provider. This way, you needn’t worry about a bill getting lost in the mail or arriving late to your snowbird location.
Online banking will let you pay bills from anywhere and provide the peace of mind that you won’t endanger your credit through inadvertent late payments.
If you have bills that cost the same each month, like electricity, heat and air conditioning or car insurance, set up auto-debit payment plans for them. That way, you won’t need to remember to send money before the due dates.
You may also want to set up direct deposit arrangements for pension and annuity payments.
Managing Energy Use in Both Homes
Remember to budget for the cost of utilities year-round for both homes because it’s unwise (and might not even be an option) to eliminate utility services for six months of the year. Weather can be unpredictable, so you don’t want your home to turn icy or furnace-like due to a surprise in the temperature.
Don’t turn off the utilities in the unoccupied home; instead, keep the heat or air conditioning at the minimum temperature to prevent burst pipes in the winter and mold in the summer. By setting the thermostat at a minimum level for the home you’re not in, you’ll keep bills low and reduce potential home damages.
Also, check with your cable and Internet provider to find out whether you can suspend service during the months you’ll be gone without incurring major penalties.
Taxes in Two States
When you live in two states during the year, your income taxes, property taxes and estate taxes can get quite complicated. States often have their own income tax and property tax rules, of course. But they also frequently have specific requirements for wills and advance directives, which may require you to rewrite yours for those locations.
Whether you’ll need to file an income tax return in your “new” state will depend on many factors, including:
- The amount of time spent there.
- Whether you own a residence.
- Where you are registered to vote.
- Your permanent mailing address.
- If you have income that was generated there.
- The state that issued your driver’s license.
Make sure you consult with a tax professional and perhaps an estate lawyer before moving to another part of the country for a stretch. That way, you’ll know in advance what the tax implications will be.
Homeowner’s Whether you’re buying or renting, check with your homeowner’s insurer to see if you’ll get a price break for covering both properties with the company. Make sure you notify your current insurer ahead of your extended vacation. Otherwise, your unoccupied home might be considered vacant or abandoned.
Auto insurance Requirements for car insurance vary by state and the amount of time you spend away from your primary home may affect your obligation to abide by two states’ rules.
Check with your current insurer. You may need to buy an out-of-state policy to keep you covered all year long.
Health insurance Some providers have multistate plans, while others charge higher co-pays, deductibles and out-of-network fees when you need coverage in two locations. Some Medicare Advantage plans have in-network doctors only in particular parts of the country.
Discuss your options with your health insurance provider to see if you need to purchase alternate coverage. When you’re a snowbird, you’ll want to preserve your health and avoid huge medical outlays no matter where you happen to nest.
*Nothing in this article should be construed as tax advice. Contact a qualified tax professional to discuss any tax matters relating to your retirement plan investment options.