Plenty of Retirees Spend One Winter in Arizona and Never Move. One Reason Comes Up Every Time
Retirees who winter in Phoenix love what they see, but full-time residents face a season that snowbirds never pay for, and that one season changes the entire financial case for moving.
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It won’t surprise you to learn that retirees from Minneapolis and Chicago often spend winters in Scottsdale or Tucson. What may surprise you is that many of these same retirees later sell their homes back north and move to Arizona for good. Accordingly, IRS figures show Arizona took in 8,751 people from Illinois and 4,889 from Minnesota in a single year, for a net gain of 27,127 residents. Weather draws many retirees, but cost, especially taxes, is a central factor in the decision. This is why it’s so critical to break down what a permanent move really costs and price the season most snowbirds never see.
Why Arizona Wins Once You Run the Numbers
On the plus side, Arizona taxes all income at a flat 2.5%, and it lets residents subtract “the amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security” under A.R.S. § 43-1022(10). In plain terms, your Social Security is untaxed at the state level, and your IRA withdrawals are taxed at a low, flat rate. If you come from a state with graduated income taxes, that difference can lower the annual state tax bill.
Housing also works in Arizona’s favor, as Phoenix homes have sold for a median of about $452K, and the median effective property tax rate in Maricopa County is 0.46%, compared with a national median of 1.02%. Federal data put Arizona’s overall cost-of-living index at 100.677. That is close to the national average and below Florida’s 103.414.
What a Full Year in Phoenix Costs Two People
So what could a working budget for a couple on Medicare who own a home worth about the median, free and clear, look like? The answer is fairly straightforward, but remember that property tax comes from the county’s typical bill. For its part, Medicare Part B uses the standard $202.90 monthly premium for each spouse. Every other line is our planning assumption.
| Annual Expense | Amount |
|---|---|
| Property tax | $2,370 (budget $2,400) |
| Insurance and maintenance reserve | $8,000 |
| Electricity | $2,600 |
| Water, gas, internet, phones | $3,000 |
| Food, groceries and dining | $12,000 |
| Medicare Part B, two people | $4,870 |
| Medigap, Part D, dental, out-of-pocket | $9,000 |
| Vehicles, including replacement reserve | $9,000 |
| Travel, gifts, personal | $10,000 |
| Summer escape | $8,000 |
| Federal and state tax on withdrawals | $5,000 |
| Emergency reserve | $3,000 |
| Total | $76,870 |
The food line is well above the USDA thrifty plan for two adults, which runs about $630 a month. An older couple who both receive Social Security gets an average of $3,355 a month after the 3.6% COLA. That works out to $40,260 a year and leaves a gap against the budget. Closing that gap at a 4% withdrawal rate takes about $915,000.
July Is the Bill Snowbirds Never See
Full-time residents pay summer costs that seasonal visitors avoid. Phoenix electric bills usually run $135 to $165 a month, but summer bills routinely reach $300 to $400+. One SRP time-of-use plan charges about 40 cents per kWh during on-peak hours in July and August, and APS has filed for a 14% rate increase.
Many new residents also leave from June through September, which is why the budget includes the $8,000 summer line. That line alone takes $200,000 of portfolio to fund at 4%. If you decide to buy a cabin up north, you are back to carrying two homes, the exact expense the move was meant to end. Prescott-area home prices fell 0.73% over the past year, but they are up 34.46% over five years. With consumer prices up 3.7% over 12 months, a summer rental gets more expensive every year whether you use it or not.
What It Takes to Make the Move Stick
A couple with the average joint Social Security benefit should plan on about $915,000 in invested assets, plus a paid-off home. This scenario assumes a 4% annual draw from broad index funds and a treasury ladder that covers the first several years of withdrawals (we made the full case for why that classic 4% figure shifts today, and what to run instead, in a free report here).
If you can stay put through the summer, the target drops to about $715,000. Timing your Social Security claim also matters. Each year you wait past full retirement age increases your benefit by 8%. If you would get $3,355 at full retirement age, waiting until 70 brings the target down to about $674,000, even with the summer escape.
Arizona’s tax treatment makes the numbers work, and the summer tests them. Renting in the Valley for a full July before selling a home elsewhere directly tests summer conditions.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
