6 Key Considerations for Snowbirds

Over the last two months, as fall moved into winter, you likely noticed Canada geese in their iconic flying-V soaring through the sky during their annual winter migration. Although spurred by the cold weather, these migrations are not simply about finding a warmer climate. Birds migrate based on resource availability. They go from areas of decreasing resources because of the cold, to areas where food and nesting locations are more abundant.

Retirees planning to move to a warmer destination for the winter should apply a similar set of strategic decision making. It is important to ensure that the destination you choose not only has a desirable climate, but provides you with the social experience, food, and health services you want and need at a price point you can manage.

When making the decision on where to winter and for how long, here are a few things to think about.  

Owning or Renting?

The answer to this question will likely be influenced by a series of factors and personal preferences, but here are some things to consider:

·      Do you want to return to the same destination every year? Some people enjoy the comfort and consistency of owning a vacation property, but others may want to change their destination every few years. Renting is a good option in the latter case.

·      If you decide to buy, make sure you budget for all the costs. Home Owner Association and condo fees, as well as the cost of hiring a property manager can significantly increase your expenses.  

·      Check into the laws surrounding ownership and the related taxes in the jurisdiction you’re looking to buy. Each country, state, and province has unique rules surrounding ownership and vacancy and it is important to take these regulations into account when deciding whether to buy or rent. For example, British Columbia has a speculation and vacancy tax that can add to your tax bill if the property you own is not your primary residence.

·      Although renting out your vacation property can be a useful way to offset the cost of owning, it might create taxable income and require you to submit a tax return in a new jurisdiction. If you are relying on this rental income, it is import to account for these potential taxes in your financial plan. 

Exchange Rates

Exchange rates can fluctuate rapidly, which can impact the cost of purchasing a vacation property and your ability to travel. Here’s a chart where you can see how the exchange rate between Canadian dollars and US dollars has changed over the last decade.  Spending a portion of the year in Arizona was much cheaper in October 2012 than October 2021. If wintering in a warmer destination is a priority for you during retirement, try selecting a vacation property and destination you will be able to afford regardless of the inevitable changes in the exchange rate.  

Health Insurance

If you are travelling outside of Canada to escape winter, it is important to make sure you have adequate health insurance. As Canadians we are so used to having universal health care that sometimes the need for and cost of health insurance gets overlooked. There are various providers that will insure snowbirds, but it is important to try to find a plan that covers emergencies as well as any of your personal health needs. The cost of prescriptions or hospital visits can be astronomical in the US or other countries if you don’t have insurance.

Residency Laws

Each country has different rules about residency and travel for non-citizens that are important to know if you’re planning a long stay. Canadians travelling to the United States can generally stay for six months without a visa, but must declare the duration of their stay upon entry into the US. If your plans change it is important to contact the US Citizen and Immigration Services to avoid any residency issues. If you’re travelling to Mexico for the winter, the maximum length granted to Canadian tourists is 180 days and there will generally be additional paperwork required to make sure you can stay in the country legally.

What social experience do you want?

This isn’t a huge concern if you are going on a trip with your spouse for a few weeks. But, if you’re buying a place and planning to stay there for six months each year, putting some thought into your ideal social life is worthwhile. If you want to host family and friends, finding accommodations that have guest suites for rent might be a good option.  If you’re looking to build a new community of friends, try envisioning how you’ll accomplish that. Buying a condo in a community that has planned activities might help you build connections quickly. Another option is to seek out clubs and community organizations where you can meet like-minded people before you commit to wintering in a location.

Food Availability

Our respective diets and food needs can vary widely. Some people crave variety, others prefer consistency. Food prices and availability can also fluctuate greatly from place to place. When choosing a destination to live for part of the year during retirement, it is worthwhile to check whether the region will provide the culinary experience you want. Most locations within North America will provide a similar food experience to what you’re used to but more and more people are looking to international retirement destinations. This is particularly important as dietary restrictions have become more common. If you are celiac for example, will you have access to the range of gluten-free products you enjoy? Or, if you prefer to eat organic foods, can you find these products in the area?

Of course, these are just a few of many considerations that will impact where you decide to spend the winter months during retirement. The key, as is so often the case in the financial world, is to have a well thought out plan that will help you make financially responsible decisions while you enjoy your desired retirement lifestyle.

And, if you pick the right habitat, you may encounter a few Canada geese along the way.