Retirement Planning in Austin

Retiring in a young city

According to the U.S. Census Bureau, 2020 to 2024 American Community Survey, 10.4% of Austin residents are 65 or older and the median age is 34.7. Compare that with older Texas cities and the difference is plain. Austin draws students, job seekers and young families, and a good number of them stay for decades. Retirement planning here is less about a golf community down the road and more about what to do with a house, a career in technology or government, and a long runway of years.

The questions people raise tend to be practical. Can I stop at 60 if my company stock performs? Should I keep the house? What will health coverage cost until Medicare begins? Where do the pension checks come from, and what happens to my spouse after I die? This page walks through those questions in the order most people face them.

Start with a spending number

Every retirement plan begins with an honest estimate of annual spending. Gather twelve months of statements and sort them into essentials, such as housing, food, insurance and healthcare, and extras like travel and gifts. Many people find that work-related costs fall away while healthcare and home upkeep grow.

Austin adds some local items to that list. Summer cooling bills run high for months. Property tax and insurance bills arrive regardless of how much income you have. If you plan to keep your car, remember that Texas does not tax retirement income but you will still pay sales tax and vehicle fees. A planner uses your total to work backward to a savings target.

Building income from several sources

Most retirees draw from a mix of Social Security, pension income, retirement accounts and sometimes rental or business income. The order in which you tap these matters for taxes. A common pattern is to spend from taxable accounts first, let tax-deferred accounts grow a while longer, and use low-income years for Roth conversions. There is no single right sequence, and it shifts with market returns and tax law, so ask a professional to model options.

Texas does not tax Social Security, pensions or retirement account withdrawals, so only the federal tax return counts. That simplicity helps, but federal rules still decide how much of your Social Security is taxable and what you pay on withdrawals.

The early retirement window for tech workers

Some Austin professionals leave full-time work in their fifties after years of strong pay and stock awards. The stretch between leaving a job and starting Social Security can be a chance to manage taxable income deliberately. You might convert part of a traditional IRA to a Roth, sell appreciated shares while your bracket is lower, or live on cash while delaying benefits.

Before you leave, check how unvested awards are treated, whether your company allows a longer window to exercise options after you depart, and when your health plan ends. Withdrawals from 401(k) and IRA accounts before age 59 and a half can bring a penalty unless an exception applies, so ask about the rule of 55 for 401(k) plans and substantially equal periodic payments.

Social Security timing

You can claim as early as 62, but monthly benefits grow if you wait until full retirement age or as late as 70. For married couples, the higher earner’s decision also sets the survivor benefit, so the choice affects the spouse who lives longer. Claiming early can make sense if your health is poor or you need the income, while waiting often helps those with long family lifespans.

Many Texas public school employees and some other government workers do not pay into Social Security, depending on their employer. If that describes you, request an earnings record from the Social Security Administration and ask your advisor how a pension and any other work history interact. A 2025 federal law changed the older offsets, so verify current treatment on the agency website.

Public pensions and the choices at retirement

This is where Austin differs from many cities. The state capital employs people through the Employees Retirement System of Texas, the Teacher Retirement System of Texas and the City of Austin’s own pension programs. Rather than describe each plan again, here are the decisions that tend to matter most:

• Choosing a survivor option that pays a spouse after you die, and understanding the lower monthly check it brings
• Deciding whether to buy service credit, if the plan allows it
• Timing your last day to line up with plan rules and benefit calculations
• Signing up for retiree health coverage, which has its own eligibility rules
• Working part time after retirement, which some plans restrict

Get an official benefit estimate in writing and confirm it with the plan before you resign.

Healthcare before and after Medicare

Medicare generally starts at 65, with an enrollment window around your birthday. Missing it can mean permanent late penalties, unless you have employer coverage that qualifies you for a delay. You will pick between original Medicare with a supplement and a Medicare Advantage plan. Advantage plans use networks, so check whether your doctors at systems like Ascension Seton, St. David’s HealthCare or Baylor Scott and White participate before you enroll.

If you retire before 65, budget for private coverage, COBRA, a retiree plan or marketplace coverage, since Texas has not expanded Medicaid. Premiums and subsidies change each year. A health savings account funded during your working years can pay for these costs tax free when used for qualified expenses.

Stay in Austin or move?

Many retirees ask whether to keep living in the city. Staying keeps you near family, medical care at Dell Medical School and the area’s hospitals, and a social scene that does not wind down at sundown. Costs may be the sticking point.

Some people choose nearby places with a different price and pace. Georgetown has a large retirement community, Sun City, to the north. The Highland Lakes towns of Marble Falls and Burnet appeal to boaters and anglers. San Marcos and New Braunfels offer river recreation. Moving farther from specialists, though, can complicate care. Rent in a place for several months before you sell the Austin home.

Using home equity wisely

The Census median home value in Austin is $555,300, and many owners have built substantial equity. Selling can fund a smaller home, cover a gap in income or boost savings. Texas has no state tax on the gain, and federal law lets many homeowners exclude a large amount of profit on a primary residence that they have lived in for two of the last five years. Confirm current limits with a tax professional.

Other options include reverse mortgages, which are complex and carry fees, or renting a room or an accessory unit. Compare the long-run costs and talk to a counselor who is not selling a loan. A move out of the home also ends homestead protections, so ask about that first.

Property taxes in later years

Home ownership continues to cost money after retirement. Texas gives homeowners over 65 a school tax ceiling and additional exemptions, and your county appraisal district can explain how to claim them. A financial advisor can then fold the result into your spending estimate. Apply on time, and review your notice each spring. Surviving spouses may be able to keep certain benefits, so ask the district before changing deeds.

Required withdrawals and charitable giving

Tax-deferred accounts such as traditional IRAs and 401(k) plans require minimum withdrawals starting at an age set by federal law, so confirm the current start date. Missing a withdrawal can bring a steep penalty. If you give to charity, qualified charitable distributions let people over a certain age send IRA money straight to a nonprofit, which can satisfy the requirement without adding to taxable income. Austin has many arts, music and animal welfare groups that benefit from this strategy.

Long-term care and living arrangements

Home care, assisted living and nursing care cost more each year, and Medicare covers only limited stays. Options include long-term care insurance, hybrid life insurance policies with a care rider, self-funding, or relying on family. Texas Medicaid pays for nursing care for people who meet strict income and asset limits and has an estate recovery program, so legal advice before gifting assets is important. Do not transfer property to children without guidance, since it can affect eligibility and taxes.

Heat, flood and storm planning

Austin summers produce long stretches of triple-digit heat, and older adults are more vulnerable to it. Budget for efficient cooling, keep a backup power or cooling plan, and know where cooling centers are. Review your homeowners policy for flood, hail and winter storm coverage, since the 2021 freeze left many households with expensive repairs. Keep a go-bag and a list of medications.

Leaving property to heirs

Texas allows a transfer on death deed, which can pass real estate to a named beneficiary outside probate when properly prepared and recorded. Beneficiary designations on retirement accounts and life insurance override your will, so review them after major life changes. Our estate planning guide covers the basics. An attorney who practices in Texas should draft or review the documents.

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Protecting against scams

Retirees are common targets for impostor calls, investment pitches and romance scams. Be wary of anyone who creates urgency, asks for gift cards or wires, or promises unusually high returns. Check advisors before handing over money, using the Texas State Securities Board and FINRA BrokerCheck, and talk to a trusted person before moving savings.

What to bring to a retirement review

Bring Social Security statements, pension estimates, account statements, insurance policies, your latest tax return and a rough monthly budget. A good advisor will use those to model a few scenarios and show how long your money may last under different markets. Read about the wider picture in our guide to retirement planning and keep notes from each meeting.

Frequently asked questions