Retire in a High-Cost City or Work Longer? Pro Advice

What pros wish you knew: housing and taxes beat latte math

Here’s the thing: the hard part about the “retire-in-high-cost-city-or-work-longer” question isn’t whether you can shave $80 a month by skipping cappuccinos. It’s whether your fixed costs and your withdrawal rate can take a punch when markets have a bad couple of years. Look, I get it, New York, San Francisco, Seattle, Boston, pick your pricey zip code, there’s family, friends, routines. But pros start with the bills that hit your account every month no matter what and then ask, “If the market stinks early on, do we still make it without gutting our lifestyle?”

Focus on the non-negotiables first. I mean literally list them:

• Housing: mortgage or rent, HOA fees
• Property tax: and don’t forget special assessments
• Insurance: homeowners/condo, umbrella, and yes, flood/earthquake where relevant
• Healthcare: Medicare + Medigap + Part D, or ACA premiums pre-65
• Utilities: power, gas, water, internet, things you can’t just cancel

Why so picky? Because when markets wobble, these are the checks that still go out. We’ve seen this movie: the S&P 500 fell 37% in 2008 (calendar-year total return) and dropped 18.1% in 2022. In 1973-1974, stocks were negative two years in a row (about −14.7% and −26.5% on the S&P 500). If those hits arrive early in retirement, the math gets unforgiving, sequence risk is the silent killer of “it’ll probably be fine.”

Taxes and healthcare are the traps people underestimate. For example, the Medicare IRMAA surcharges kick in if your modified AGI exceeds $103,000 single or $206,000 married filing jointly for 2024; premiums jump tier-by-tier, and the lookback rules catch folks by surprise. The standard Part B premium was $174.70/month in 2024, but with IRMAA it can be several hundred more per person. And until you’re on Medicare, ACA premium credits are still enhanced through 2025, there’s no hard 400% FPL cliff right now, but subsidies phase out fast as income rises. Also remember: the $10,000 SALT deduction cap is still in place through 2025, which matters in high-tax states.

So, the pros’ playbook is simple to say (not always simple to do):

1. Map your fixed costs for the next 12 months at today’s prices, then add a realistic cushion for property insurance hikes and property tax creep. Actually, wait, let me clarify that, do it at today’s prices, then stress the line items that have been rising faster than CPI.
2. Test cash flow under stress: what if your portfolio drops 20-30% in year one and dividends get cut? Can you still cover those fixed costs with a withdrawal rate at or below your plan?
3. Audit your withdrawal rate. William Bengen’s 1994 research on the 4% rule gets quoted to death, but if you’re carrying high fixed costs in a volatile market with today’s yields, a safer range might be closer to 3.3-3.8% depending on allocation and flexibility. I might be oversimplifying, but you get the idea.
4. Check the cliffs: IRMAA tiers, ACA subsidies, and state taxes. Small income changes can trigger big cost jumps, bigger than your grocery savings, again and again.

Quick gut check: If staying in your city pushes your withdrawal rate above what your plan can safely support in a bad first two years, the city is effectively a leveraged bet on markets cooperating.

This isn’t about panic. It’s about sequencing your decisions like the pros do, fixed costs first, stress test next, then decide whether staying put is a luxury you can reliably fund, not just in good markets, but in the crummy ones too. And yes, I love my city. I also love not waking up worried every time futures are red.

Run the two-path math: stay put vs. work longer

So, here’s where you stop hand-waving and actually compare A vs. B using after-tax cash flows. Not gross. After-tax, after-healthcare, after-rent. Path A: retire now in your high-cost city. Path B: work 1-3 more years (or shift to part-time), delay Social Security, and cut sequence risk. I’m still figuring this out myself on a couple clients this quarter, but the framework below is what we use on the desk.

Set the baseline (assumptions that matter right now)

• Social Security timing: Delayed credits increase benefits by 8% per year from full retirement age to 70 (SSA rule, current in 2025). If your FRA is 67 and you wait to 70, that’s a ~24% higher monthly check for life, plus COLAs layered on top. That’s not a rounding error.
• Taxes where you live: If you’re in NYC, you’ve got New York State income tax plus NYC resident tax. NYC’s local personal income tax runs roughly ~3.08%-3.88% depending on income (NYC Department of Finance; current schedule in 2025). New York State brackets for middle-to-upper incomes land you in an effective state rate in the mid-to-high single digits, higher at the top end. California’s top rate still caps around 13.3% (state schedules; 2025), no local income tax but property and sales add up. Point is, your city’s stack changes the math a lot.
• Market context: Cash and short Treasuries aren’t free anymore. 3-6 month T‑bills sat near 5% for much of 2023-2024 and are closer to the mid‑4% range this year (U.S. Treasury data, 2025). The 10‑year’s been hovering around the low‑to‑mid 4s in recent weeks. So safe yield helps, but equity volatility still bites when withdrawals are high.

Path A (retire now, stay put)

• Income (after tax): Estimate current Social Security if you claim now, minus federal + state/local taxes. Add any pension or annuity net of taxes. If you’re pre‑Medicare, include ACA subsidies net of income. If you’re on Medicare, include IRMAA surcharges where applicable.
• Expenses: Use your city’s real housing number (rent or mortgage + taxes + insurance + HOA). If you rent in NYC, a realistic mid‑market assumption could be $4,000-$5,000/month right now depending on borough and size, yes, still sticky in 2025. Add utilities, transit, dining, and travel. Don’t forget state/city-specific costs.
• Portfolio withdrawals: Fill the gap with after-tax withdrawals. Model sequence risk: what if the first two years deliver -15% equity and flat bonds? Keep your withdrawal rate inside the safe range you identified earlier (for many, ~3.3-3.8% in high-cost cities with today’s yields, assuming balanced allocation and some flexibility).

Path B (work 1-3 more years or part-time)

• Income (after tax): Add net pay (full or part-time). Re-run payroll withholding, state/local taxes, and retirement contributions. Consider funneling extra to pre-tax accounts to manage IRMAA/ACA cliffs. It’s not sexy, but it works.
• Delay Social Security: If you delay 2 years beyond FRA, your check is roughly ~16% higher; 3 years is ~24% higher (SSA, 2025). That larger inflation-adjusted base reduces lifetime portfolio withdrawals, especially if you live into your late 80s or 90s.
• Healthcare: Employer coverage for a couple more years can be a quiet win. If you’re on Medicare, part-time income might bump IRMAA, so run it both ways.
• Portfolio effect: No (or smaller) withdrawals during the “fragile first years” can cut failure risk materially. And if markets are meh, you aren’t forced sellers. I’ve watched this play out, staying in the seat for 18 months saved one client’s plan when 2022-2023 were choppy.. actually, let me rephrase that: it saved their nerves, too.

Sensitivity tests to add (don’t skip these)

• Rent +10% or property taxes +20%: In high-cost cities, renewals surprise people. Re-run both paths.
• Lower returns: Stress with 0% real for 3 years, or a -20% equity shock year one. Treasury yields helping today won’t erase a bad sequence.
• Healthcare spikes: Price a $8,000-$15,000 one-time hit (dental implants, surgery) and a 20% premium jump. Medicare Part B and D are indexed; IRMAA tiers can add hundreds per month. Tiny income changes can trip this, again.
• Tax migration: Compare your city vs. moving one ZIP code over (no city tax) or to a no-income-tax state. The delta is your annual “permission slip” for travel or home maintenance.

How to read the result

• If Path A needs a 4.5%+ net withdrawal and fails under a two-year bear test, the city premium is asking markets to cooperate. That’s not a plan; that’s a wish.
• If Path B drops net withdrawals below ~3.5%, boosts Social Security by ~16-24%, and lets you avoid selling in a slump, you’ve bought real flexibility. Not forever, just when it counts.

And look, I love staying put. Good coffee, familiar streets. But the math has to hold after tax, after rent, after healthcare. You can absolutely retire now and be fine, people do it every week. The thing is, a couple extra paychecks in 2025-2026 can turn a tight plan into a comfortable one.. but that’s just my take on it.

Housing is the boss: own vs. rent math that actually matters

Look, in coastal and so‑called superstar cities, housing isn’t a budget line item, it’s the budget. The mistake I see, over and over, is comparing today’s mortgage payment to today’s rent and calling it a day. That’s incomplete. You need total carrying cost vs. a realistic rent path somewhere you’d actually live, plus the opportunity cost of the equity you’re locking into the walls.

Owning, count everything

• Mortgage: Rates have bounced between roughly 6%-7% this year (2025), so your principal/interest can be chunky.
• Property taxes: Effective rates vary, think ~0.7% in California (Prop 13 keeps it weird), ~1.0%-1.3% in many metros, ~2%+ in parts of the Northeast and Midwest. The number matters more than the percentage, multiply your current assessed value, not wishful thinking.
• HOA/condo dues: $500-$1,500+ per month isn’t unusual in big-city buildings, special assessments happen, and they never come when you want them, you know?
• Insurance: Homeowners premiums have seen double-digit increases in 2023-2024 in many states; coastal wind and wildfire markets are especially jumpy right now. Budget conservatively in 2025.
• Maintenance: A common planning placeholder is 1%-2% of home value per year. On a $1.2M place, that’s $12k-$24k annually, new roof, elevators, stucco, the whole parade.

Renting, be honest about rent inflation and stability

• Rent path: National rent growth cooled last year, Zillow’s index showed around ~3% year-over-year in 2024, while coastal submarkets ran anywhere from near‑flat to mid‑single‑digits depending on neighborhood. For planning in 2025, assume 2%-4% annual increases unless you have a strong reason not to.
• Relocation risk: You might face a move every few years, more hassle than cash, but still a cost. If continuity matters (schools, doctors), price that inconvenience, even if it’s just a buffer in your budget.

Opportunity cost, the quiet line item

Here’s the thing: every $100k tied up as equity is $100k that isn’t offsetting withdrawals. If your portfolio withdrawal target is 4%, then $100k of freed-up equity is roughly $4,000 less you need to pull annually, before taxes. Actually, let me rephrase that: it’s not magic income; it just lowers the pressure on your portfolio to produce cash. That matters in bad markets.

Rule of thumb: 1%-2% maintenance; 2%-4% rent growth; and treat home equity like an asset with a yield equal to the withdrawal rate you’d otherwise need.

A quick, slightly simplified case (I’m probably oversimplifying, but stay with me):

• Own a $1.2M condo, 60% equity. 2025 mortgage at 6.5%, taxes at 1.2% ($14,400/yr), HOA $900/mo, insurance $2,500/yr, maintenance at 1.5% ($18,000/yr). All-in annual carrying cost might be, ballpark, $85k-$95k depending on the mortgage piece.
• Comparable rent today: $5,800/mo ($69,600/yr), rising 3%/yr. Call it ~$79k by year 5 if the path holds.
• Sell now, rent, and free up ~$720k equity after costs. At a 3.5% portfolio withdrawal target, that equity reduces needed withdrawals by ~, which can offset a rent premium or fund healthcare and travel. If you downsize and buy a $700k place all-cash, your annual maintenance/tax/insurance load might drop into the $25k-$35k range, which materially lowers your withdrawal rate. Different paths, different stress levels.

What to actually do

1. Build a true owner’s P&L: mortgage, taxes, HOA, insurance, 1%-2% maintenance, plus a reserve for big-ticket items. No hand-waving.
2. Price a realistic rent in two places: your current metro and a “good enough” cheaper metro. Layer in 2%-4% annual increases and a small moving reserve every 3-5 years.
3. Run two scenarios: sell-and-rent and sell-and-downsize. Measure how each changes your withdrawal rate and your ability to avoid selling stocks in a slump. If selling drops your net withdrawal from, say, 4.6% to 3.3%, that’s real flexibility.
4. Stress test: two down years early (we’ve all seen it). Which path still works without panic? That’s the keeper.

Anyway, housing is the boss, treat it like the boss. If the own math pencils out after everything, great. If renting or downsizing lowers your withdrawal rate and buys you the option to not sell when markets are moody, that’s usually the better call, even if it’s not the dream ZIP code. And hey, you can always revisit it later this year if rates drift or your building drops a surprise assessment (they always do, occassionally).

Taxes can flip the answer: where you live, what you withdraw, when you convert

Housing might be the boss, but taxes are the boss’s boss. Here’s the thing, state taxes, local add-ons, and the order you pull money from accounts can turn a “stay put in the pricey city” plan from borderline to fine, or the other way around. I’ve seen retirees in NYC and SF think they’re ok on a 4% withdrawal rate…until the 3%-4% city levy lands on top of state and federal, and suddenly it’s 4.6% after-tax. Look, I get it: nobody wants to move purely for taxes. But you at least need the math.

Map the state rules before you commit

• Social Security: Federally, up to 85% of your benefit can be taxable depending on “provisional income” (AGI + tax-exempt interest + 50% of Social Security). The thresholds, $25,000 for single and $32,000 for married filing jointly, haven’t been indexed since the 1980s/1990s, which is wild. States are a mixed bag: some don’t tax it at all, some partially, a few fully tax based on income. The difference between “0% state tax on SS” and “the state wants a piece” can be thousands a year for a typical couple.
• Capital gains: Federally you’ve got a 0%/15%/20% long-term ladder. States mostly tax gains like ordinary income, no special break, which matters a lot if you’re selling a house, a business, or trimming a concentrated stock. A handful of states have no broad income tax, but cities can still layer their own rates (NYC’s resident tax runs roughly 3%-4%).
• Local levies and deductions: Some states let you deduct a slice of retirement income; others cap SALT deductions at the state level or don’t conform to all federal rules. Tiny lines on a return, big dollars over 25 years.

SECURE 2.0 gave you a planning window

SECURE 2.0, enacted in 2022, moved Required Minimum Distributions (RMDs) to age 73 starting in 2023. Translation: you’ve got more runway to shape your tax profile before forced withdrawals begin.

That extra runway in your early-to-mid 60s is gold. If you’re retiring in a high-tax city now but plan to move later this year or next, you can time Roth conversions to the year you’re in the lower combined tax. Honestly, I wasn’t sure about this either the first time I modeled it for a client, until I saw a $400k Roth conversion spread over four years reduce lifetime taxes by six figures while keeping IRMAA surcharges manageable.

Use your brackets strategically

• Fill the lower brackets, don’t waste them. If part of your income “space” sits at 12% or 22% federally, consider Roth conversions before RMDs start at 73. The goal is to convert just enough each year to avoid jumping a bracket you’ll regret and to manage Medicare IRMAA cliffs.
• Remember the Social Security tax torpedo: adding $1 of IRA income can make more of your SS taxable, temporarily spiking your effective rate. Modeling this beats guessing.
• Tax-loss harvest in taxable accounts to offset realized gains if you’re pruning a concentrated position, especially useful if your state treats gains as ordinary income.

Thinking about moving? Sourcing rules matter

• Part-year filings: The move year usually means two state returns. Track the date you change domicile, driver’s license, voter reg, where you actually live, because states care.
• Where retirement income is taxed: Under federal law (4 U.S.C. §114), states generally can’t tax retirement plan distributions (pensions, 401(k), IRA) of nonresidents. That means if you leave a high-tax state and then take the distribution, the new state of residence gets to tax it, not the old one. Wages, RSUs, and stock options are different, those can be sourced to where you earned them. I’ve seen people trip over that one right at the finish line.
• Cap gains on a home sale: The federal exclusion ($250k single/$500k MFJ) is still there, but states vary on conformity. If you’re selling, the timing relative to your move can change your state tax bill materially.

Real-world context, right now

Rates are still decent on cash and Treasuries, call it around the 4% neighborhood this year, so you can cover living costs while converting without selling as many equities after a wobbly month. The sequencing matters: first decide the state, then dial in the order of withdrawals (taxable vs. IRA vs. Roth), then pick the timing. I was about to get into qualified dividends and how they stack with capital gains, but the bigger lever, nine times out of ten, is still Roth conversion sizing before age 73.

Bottom line: staying in a pricey city can still work, but you need the tax map. Use the SECURE 2.0 window, fill your lower brackets on your terms, and if you’re moving, mind the sourcing and part-year rules. Do that, and you reciever… sorry, receive… more control over your after-tax cash flow. And control is what buys you sleep.

Healthcare reality check: Medicare timing, ACA credits, and the 2025 window

Here’s the thing: healthcare is the sleeper variable that can blow up an otherwise clean retirement plan, especially if you stop full-time work before 65. For anyone eyeing a gap year (or three), the Affordable Care Act subsidies are still juiced by the Inflation Reduction Act, the enhanced credits run through the end of 2025. That means no hard subsidy “cliff” at 400% of the Federal Poverty Level and a cap that keeps the benchmark Silver premium to no more than 8.5% of household income (per ARPA/IRA). That cap matters, you know, because premiums in some high-cost metros can look like rent.

Numbers to ground it: the marketplaces use the prior year’s FPL table. For 2025 coverage, exchanges used the 2024 HHS FPL: $15,060 for a single person and $31,200 for a family of four in the 48 states/DC (Alaska and Hawaii differ). With the enhanced credits, even households well above 400% FPL can still see subsidies, again, as long as your Modified AGI stays in a reasonable band relative to local benchmark premiums.

MAGI management 101: ACA uses a specific MAGI definition. Roth withdrawals don’t show up in AGI (so they don’t increase ACA MAGI), while traditional IRA/401(k) withdrawals do. Capital gains, interest, dividends, yep, those count. Non-taxable Social Security is included for ACA MAGI too. So, if you’re 60-64 and want to keep your premium share low in 2025, you can lean on cash, basis in taxable accounts, or Roth dollars, and delay big traditional withdrawals or realizing gains. Look, I’ve seen people swing their net premiums by thousands a year just by shifting which bucket they tapped in Q4. Honestly, I wasn’t sure about this either years ago, but the math wins.

Timing matters in 2025: open enrollment for 2026 coverage starts Nov 1 later this year, but the window that really counts for the enhanced credits is your 2025 income. If Congress doesn’t extend the IRA provisions, the 8.5% cap and the no-cliff rules sunset after December 31, 2025. That’s not a prediction; it’s just the law on the books right now.

Medicare at 65: Once you hit 65, Medicare takes over from ACA. The initial enrollment period is seven months (three before, your birthday month, and three after). Miss Part B (or D) timing and you can face penalties. And here’s the kicker everyone forgets: IRMAA surcharges are based on MAGI from two years prior (per SSA). Your 2025 income affects your 2027 Medicare premiums. So that giant 2025 Roth conversion? Great for long term taxes, but it can trigger IRMAA brackets later. Not the end of the world, but it’s a cost. Actually, let me rephrase that: it’s a cost you should plan for, not fear.

Bridge coverage if you retire before 65:

• COBRA can run up to 18 months. It’s convenient but often pricey.
• Marketplace plans can be cheaper with the 8.5% cap, if you keep MAGI in line.
• Part-time work with employer coverage? Coordinate carefully. If it’s affordable and meets minimum value, you may not qualify for ACA subsidies during those months.

Real-world context, right now

Rates are still hanging around the 4% zone this year on short Treasuries and decent money funds, so you can park cash to cover living costs while managing MAGI, without forced asset sales after a choppy stretch in stocks. Use that dry powder to avoid realizing gains in a high-subsidy year. And yes, I know I said this earlier, but it bears repeating: which account you tap in which month can change your net premium more than your asset mix does.

Actionable sequence: map 2025 income now; size any Roth conversions with IRMAA-2027 in mind; plan bridge coverage (COBRA vs. ACA) through the month before Medicare; and if you’ll keep a part-time role, get HR’s definition of “affordable coverage” in writing. So basically, line up the healthcare calendar with your tax calendar. That coordination buys you sleep, again, the thing that actually pays dividends.

Withdrawal rate sanity check: can your portfolio carry your zip code?

Here’s the thing: before arguing about asset mixes, translate your lifestyle into a percentage. Take your expected first-year withdrawals (after any pensions or Social Security) and divide by your portfolio on the day you retire. That’s your initial withdrawal rate. If you need $120,000 from a $2.0 million portfolio, that’s 6%. If your city, property taxes, and $28 avocado toast (kidding, kind of) push you to 5%-6%+, you’re leaning on strong markets and luck. You might be fine. Or not. I’ve seen both outcomes, same math, different timing.

Historical anchors help but aren’t gospel. William Bengen’s 1994 study points to a ~4% starting rate (30-year horizon, U.S. large-cap stocks and bonds) surviving the worst rolling periods through the 20th century. Morningstar’s 2021 work, facing low bond yields, marked it down to about 3.3% for a typical 30-year retirement. Then in 2023, as bond yields rose, they lifted their base case to roughly 4.0%. Markets and yields move; rules of thumb should too. This year, short Treasuries and money funds are still hovering around the 4% zone, which actually gives the bond sleeve a pulse again.

Look, I love neat numbers as much as anyone, but your actual safe rate depends on a few levers:

• Mix: A 50/50 stock/bond mix historically supports lower withdrawals than a 60/40 in strong decades, but it may hold up better emotionally in slumps. Trade-offs everywhere.
• Fees: All-in costs of 1.0% can lop your sustainable rate by something like 50-100 bps versus a low-cost setup; fees come out rain or shine.
• Flexibility: If you can trim after bad years, your starting rate can be higher. If your spending is cemented in granite, lower it.

Guardrails that actually help

• Spend less after bad years: After a negative year in the portfolio, hold the next year’s withdrawal to last year’s dollars or cap the raise to, say, 0%-1%. That tiny brake matters for compounding.
• Cash buffer: Keep 12-24 months of expenses in T‑bills/money funds (again, roughly 4% yields this year). It’s a volatility shock absorber so you’re not selling stocks at lousy prices.
• Annuity floor: For non-negotiables, housing, utilities, basic healthcare, consider a low-cost SPIA quote. Turning market risk into a paycheck can drop your needed rate on the remaining portfolio by 0.5-1.0 percentage point. Get multiple quotes; pricing varies.

Sequence risk is real, sorry for the jargon. Actually, let me rephrase that: the order of returns matters. Losses early in retirement hurt more because you’re withdrawing from a smaller base. Stress-test the first five years specifically. For example, ask: if equities are down 20% in year one and flat in year two (we’ve seen stretches like 2000-2002), and inflation runs, say, 3%-4%, can you still meet spending without selling risky assets at the bottom? The 2007-2009 drawdown saw the S&P 500 fall about 57% peak-to-trough; that’s the kind of hit your plan should withstand if your spending rate is aggressive.

Practical thresholds

• 3%-4%: Usually durable with a balanced mix, low fees, and minor flexibility.
• 4.5%-5%: Needs either strong market luck, chunky equity exposure, or real flexibility, think spending cuts in bad years.
• 5%-6%+: High-cost-zip-code territory. Not impossible, but you’re playing offense in a league that punishes early losses.

This actually reminds me of a couple who wanted to retire in a coastal metro with $1.6 million and $90k spend (5.6%). We built a two-step: part-time work covering 20% of spending for three years and a 24-month cash bucket. That took their first-year portfolio draw to ~4.5% and gave markets time to, you know, be markets.

If your number is too high

• Work six-twelve months longer. Every extra year of savings and one fewer year of withdrawals can move the needle by ~0.3-0.6 percentage point on the starting rate.
• Trim housing or taxes (sometimes zip code beats asset allocation). Even a $1,500/month swing is $18k a year, on a $2 million portfolio, that’s 0.9 percentage point off the withdrawal rate.
• Delay Social Security a year to raise the guaranteed floor; that reduces portfolio strain. Not glamorous, very effective.

Quick formula: Required initial withdrawal rate = Year 1 withdrawals ÷ Portfolio value. If it’s 5%-6%+, build guardrails or change the inputs, spend, work, location, or guaranteed income, before markets do it for you.

Okay, so what should you actually do next?

Here’s the thing: make the decision boring on paper. Start with housing because it’s the lever you feel every month.

• Price your housing, fully: List PITI (principal, interest, taxes, insurance), HOA, maintenance (I use 1% of home value per year as a baseline), utilities, and any big known repairs in the next 5 years. Then put a realistic rent or downsize option next to it. If you could rent for $3,200/mo and your current fully-loaded carry is $5,100/mo, that’s a $22,800 annual swing. And list how much equity you could free after selling costs and the $250k/$500k capital-gains exclusion on a primary residence (Section 121). With 30-year mortgages still hanging around the mid-6% to mid-7% range this year, buying a lateral home often doesn’t pencil unless you downsize or move zip codes.
• Draft two plans on one page: A) Retire-in-place now. B) Work 1-3 more years or go part-time. For each, build a 10-year after-tax cash flow: salary/part-time income, Social Security (run age 62/FRA/70 scenarios; delaying after FRA raises benefits ~8% per year until 70), pensions, dividends, and portfolio draws. Be honest on spending, monthly nut + annual lumpy stuff (travel, cars, roofs). If your starting draw is 5%-6%+, you need either guardrails or different inputs. And yes, honestly, I wasn’t sure about this either the first time I did it for my own family.
• Map the taxes early: Confirm your state’s treatment of Social Security and capital gains (a few states tax SS; many don’t). Sketch Roth conversions in the gap years before Required Minimum Distributions start at age 73 under SECURE 2.0 (enacted 2022). Fill the 12% or 22% federal brackets deliberately, and watch IRMAA thresholds for Medicare, bracket jumps can raise Part B/D premiums.
• Healthcare plan: If under 65, model ACA coverage using 2025 rules, thanks to the Inflation Reduction Act extension, benchmark silver premiums are capped at ~8.5% of household income with no hard income cliff through 2025. That matters for Roth conversion sizing. If 65+, estimate Medicare Part B/D plus either Medigap G or Advantage; include dental/vision and a realistic OOP max. Prices vary by county, so pull quotes, not guesses.
• Set a target withdrawal rate and guardrails: Pick a starting rate that matches your mix, many households land 3.5%-4.5% with today’s yields. Add guardrails: if portfolio drops 20%, cut real spending 5%-10%; if it rises 20%, allow a 3%-5% raise. If Plan A (retire now) puts you above your guardrail but Plan B (work a bit) fits comfortably, that’s your answer. Not heroic, just arithmetic.
• Put dates on decisions: Note lease renewals, home-sale windows (spring still sells better, but I think late summer has surprised me before), Medicare/ACA enrollment periods (Initial/Annual/SEP), and your Social Security filing date. Back-schedule tasks by 60-90 days so you don’t miss windows.
• Reality-check with current markets: Yields are still decent compared to the 2010s, which helps the first decade. Equities have been, let’s say, moody this year, so keep 1-2 years of baseline withdrawals in cash or T-Bills and a 24-month cash bucket if that helps you sleep.
• Revisit on a clock: Update the plan in 6-12 months or after any big market move, housing change, or tax law update. And if I remember correctly, every time we’ve done this with clients, the second pass is where the decision becomes obvious.

Quick checklist: Housing delta + freed equity → Two plans with after-tax cash flows → Tax map (SS, CG, Roth before 73) → Healthcare costs (ACA 2025 cap ~8.5% or Medicare) → Withdrawal rate + guardrails → Decision dates on a calendar → Revisit twice a year. It’s a lot, I know… but that’s just my take on it.

Look, it’s messy and occassionally annoying. But writing this out makes “retire in a high-cost city or work longer” stop being a vibe and start being math. And math, you know, doesn’t care about our mood on a Tuesday.

Frequently Asked Questions

Q: How do I figure out if I can retire in a high-cost city without blowing up my plan?

A: Start with the boring stuff that always gets paid: (1) housing (mortgage/rent, HOA), (2) property taxes, (3) insurance (home/condo, umbrella, hazard like quake/flood), (4) healthcare (Medicare + Medigap + Part D, or ACA if you’re 25% of your fixed costs, relocation wins. If your job is stable and you can boost cash reserves to 24-36 months of fixed costs by March next year, the extra year wins.

Q: Should I worry about IRMAA and ACA subsidies messing up my healthcare costs?

A: Yes, because these two can blindside you. For Medicare, IRMAA uses a 2‑year income lookback. For 2024, the MAGI thresholds were $103,000 (single) and $206,000 (MFJ); cross a tier and your Part B premium (standard was $174.70/mo in 2024) and Part D jump, per person. Control MAGI around age 63-65: do Roth conversions before Medicare, use QCDs from IRAs after 70½, harvest losses when you can, and avoid big one‑time gains in those lookback years. If you retire before 65, the ACA is still friendlier through 2025, enhanced credits mean no hard 400% FPL cliff, but subsidies phase out as income rises. Keep MAGI in a target range (many households aim roughly 150%-250% of FPL for stronger support, exact dollars depend on family size and year), and consider silver plans if you qualify for cost‑sharing reductions. Tactics: live off cash/basis to manage MAGI, delay Roth conversions until you’re on Medicare (or finish them by 64), and if you had a life‑changing event (retirement, marriage, etc.), file SSA‑44 to appeal IRMAA. Look, spend five minutes running MAGI projections before you realise you won’t recieve a subsidy you were counting on.

@article{retire-in-a-high-cost-city-or-work-longer-pro-advice,
    title   = {Retire in a High-Cost City or Work Longer? Pro Advice},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/retire-high-cost-or-work-longer/}
}