Maine, The Way (Early Retirement) Life Should Be

We have some amazing mentors in the Millionaire Money Mentors (MMM) forums and today I’m sharing a post from one of them.

This story tells how he used some out-of-the-box thinking to move to a preferred location as well as improve his finances. 

I thought ESI Money readers would appreciate this story and learn a lot from it, so he gave me his permission to post it here.

I won’t steal any of his thunder by giving anything away, so let’s just get to the details now…

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After hinting about my latest update on several posts, it’s finally time to share the news that I’ve moved to the coast of Maine – it’s beautiful and much less expensive than Boston!

The Way Life Should Be

As you drive into Maine from the south, you are greeted with this sign as you cross the border:

Maine, The Way Life Should Be

It’s been there since my college days and, while I didn’t fully appreciate it back then, I now fully understand how true that claim really is. Maine is picturesque, quiet, and a lot things get done here on a handshake.

One of the big levers that we all can pull when transitioning into retirement is to relocate to a place that better suits our new phase of life and is (optionally) less expensive. While my move was fully motivated by the former, there is no denying that the financial benefits of moving to a lower cost of living area are substantial. What follows are my thoughts on why Maine should be on your short list for retirement destinations.

For context, I’m moving from a $600k condo outside of Boston to a $400k home on .5 acre on the edge of a town center. It’s a new build on a super quiet cul de sac and has town water / sewer, so the initial amount of maintenance should be minimal.

Since this is primarily a finance site, let’s start with the money side of the equation.

HCOL → MCOL

If you find that you are close to having enough to retire, but don’t think you are quite yet there, consider moving to a lower cost of living location. Not only might it be a better fit for your retirement lifestyle, it might enable you to retire years earlier.

In my case, I am expecting that my move from a High Cost of Living area outside Boston to a Medium Cost of Living area in Maine will improve my cash flow by at least $20k annually (details below). Using the 4% rule, this equates to having another $500k in my portfolio. If you’re still looking at a number of years before hitting your ‘number’ based on your current location, consider how much sooner you could retire if you didn’t need to save up another half a million!

Even if you are already retired like me, adding $20k to your annual spend suddenly opens up a world of possibilities – it’s time to think big and I’ve got some plans for how to make the most of it (further below).

Here are the details of my expected annual cash flow improvements:

Insurance: -$2475

• Home: Boston $1800 – Maine $275 = $1525
• $2m Umbrella: Boston $1200 – Maine $250 = $950
• Car Insurance Boston $1250 – Maine $1250 = $0 (Apparently the moose in the roadway are just as dangerous as Boston traffic…)

Food: +$1300 (Sadly, there are no Aldi in Maine. So, my food costs are going to increase – but I’ve heard rumors that they’re coming!!)

Real Estate Taxes: -$2400

State Income Taxes: -$3000 (details below)

HOA: -$4344 (We do have the pleasure of doing our own outdoor maintenance again, but the total capital outlay for a lawn mower, snowblower, and various tools has been a one-time cost of $2200)

Mortgage Elimination: -$11,800

• Current Principal / Interest Payment: -$20,400 + Reduced Portfolio Income of $8,600 (In addition to using the equity in my condo, I used $215,000 of cash from my brokerage account which is currently earning 4%. So, I’ll be receiving less income in exchange for having no mortgage.)

Utilities: TBD (My condo has air conditioning which I don’t have (or need!) in Maine and I won’t know winter heating costs until the spring. However, the house is brand new and Maine has some pretty strong energy efficiency requirements for new builds (e.g. triple-paned glass), so I’m guessing that my utility costs will be 30%+ cheaper in Maine.)

Everything Else: TBD (Other than groceries and gas which is $0.15 more / gallon, it looks like almost everything else is 20%+ cheaper than Boston.)

$0 State Income Tax (or at least greatly reduced!) via Maine Pension Income Deduction

In this neck of the woods, New Hampshire is usually the go-to state for their lack of state income taxes. However, Maine can also be income-tax-free for the early retiree of moderate means!

Maine offers a “pension income deduction” of $45k / year. No pension? No problem! “Pension Income” includes Social Security, IRA distributions, and actual pension payments. If you’re retiring before starting Social Security or a pension, you can still leverage this deduction by taking distributions from your IRA. If you’re under 59.5, a SEPP / 72t is the penalty-free way to use this deduction.

The conventional wisdom for early retirees is to use the time before collecting Social Security to perform Roth conversions. For early retirees in Maine, however, those conversions are fully taxable whereas the first $45k of an IRA withdrawal via SEPP is not.

In my case, I’m 54 and at the ideal age to start a SEPP as the 5-year minimum duration coincides nicely with the 59.5 threshold. Specifically, I’m planning on starting a SEPP for $52k. I’ll pay a little bit of state tax for the first couple of years, but the deduction is indexed and should grow past my $52k before my 5 years is up. Thus, my distributions at the end of my SEPP will be state-tax free. After my SEPP has concluded in 5 years, I’ll increase the distribution to maximize the deduction every year after that.

In general, IRA withdrawals are slightly less tax efficient than Roth IRA conversions. However, the tax deductibility more than makes up for it.

Beautiful Place to Call Home

Beyond all of the financial reasons mentioned above, Maine is undeniably one of the prettiest states in the country.

From the rugged coastline to the mountain hikes, there’s something here for everyone. Plus, you don’t even need AC!

I’m looking forward to getting out with my camera once we’ve fully settled.

Motivations for Moving

When I downsized to my condo, my kids had just gone off to college and I was planning on being an empty nester…

After graduation, my daughter moved home (which is awesome!) and works a full-time remote job from our kitchen table. Unfortunately, the layout of my condo was not really designed for a full-time remote worker. Plus, the community it is in is a pseudo-retirement community where I’m one of the youngest owners.

After a year of trying to make it work, I decided to make her an offer she couldn’t refuse: I would buy her a house of her choosing (kept in my name), but she would pay for all of the expenses and maintenance. It won’t generate any revenue like a typical rental, but it won’t cost me anything to have it on my balance sheet, either.

This move was inspired by what others here have done: The house and car will stay in my name, but it’ll be my daughter’s home and she’ll be the primary driver of my car. I get one bedroom to stay at while I’m there and store the few personal belongings that I’d like to keep. The total cost to her will be substantially less than rent on a 1BR and, since the house will pass to her eventually, it’s like she already owns it.

But if it’s her house, then what am I going to do? This is where the story gets interesting!

Full-Time International Travel

Since retiring 2 years ago, I’ve been traveling 5-6 months / year – mostly while my kids were away at college. However, with my son also graduating in the spring, there is less of a need for me to be around.

Going forward, I will be extending my travel to 11+ months per year. I’ll be in Maine around the holidays and make short stops during the year to swap out gear, but I’ll mostly be on the road.

From a budgetary perspective, I’m planning on spending $5k / month. Based on my trips to a similar mix of high and low-cost areas over the past 2 years, this should be quite doable (and probably even high!).

Full-Time Van Life

After finishing off my initial list of international trips sometime next year or the year after, I’m planning on embracing Van Life and traveling the US, Canada, and Alaska for a few years.

For those of you waiting for me to get to the splurge that I hinted at above, this is it. With the cost of my ideal van equal to an average house in my midwestern hometown, this is definitely going to make Ramit Sethi proud!

Once I’m on the road in my van, having a home base in Maine will really pay dividends. Unlike everywhere else in the US, there aren’t a lot of places in New England that have free (or even reasonably-priced) dispersed camping, campgrounds, or state parks. My daughter’s place is a great jumping off point for day trips throughout Maine and New Hampshire and is a solid staging area for trips to Nova Scotia.

After That?

Once I hit 59.5 and have full penalty-free access to my IRAs, I’ll either continue to travel full time or finally settle down – ironically, just as everyone else my age is finally getting around to retiring and starting their travel adventures.

It’s hard to know what I’ll want to do that far out, but I’ve built my plan for optionality and I should be able to do whatever I want when I get there.

Finances and SWR Math

For those that were at my talk at the MMM conference in 2024, I went through my math and shared that, once factoring in Social Security and mortgage elimination, the financial decision to retire was truly a no-brainer.

This change is the no-brainer realized.

Specifically, when I decided to retire 2.5 years ago, my withdrawal rate was nearly 4.5%. (“You can’t retire! Especially with a 40-year retirement!!!”) With the growth in my portfolio since then, it is now slightly under 4%. My move to Maine has enabled me to pursue my dreams and reduced my planned spend to $60k. On an investable portfolio of $1.9m, this brings me down to 3.15%. Further, it will get close to 2% once Social Security kicks in.

This just goes to show why a simplistic 4% rule calculation shouldn’t be used as the sole means to determine if you are financially ready to retire. After digging into your specific scenario, you may find that you have already overshot the mark!

Final Thoughts

Just because you think your numbers don’t pencil out for an early retirement yet, I challenge you to consider some creative alternatives like moving to a lower cost of living location. The best location for your working years may not be the best location for your retirement years, and a change in location might just be what it takes to make your retirement dreams come true years earlier.

If this has inspired you to look around, then I welcome you to consider Maine. It’s number two on this list (The 10 best U.S. states to retire—it’s about more than ‘just the number of sunny days and taxes’) for a reason!