The first time Judy and Vern Peterson saw Bloomington, Ind., was when they flew in from California to buy a home in February 2006.

The couple had researched places to retire, making a spreadsheet with a list of their priorities on the left column and potential cities across the top. Bloomington came out No. 1. It met their most important criteria: affordable, small, university town with cultural attractions, and a major airport nearby. The city is home to 39,000-student Indiana University and a one-hour drive south of Indianapolis.

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"We never thought we'd ever live in this part of the country," says Mr. Peterson, age 72, whose sister in Illinois suggested Bloomington to them.

That sentiment -- surprise at finding oneself in the Midwest -- isn't unusual among retirees. Most adults who move in later life head for the Sun Belt. But couples are discovering that small and midsize towns in states like Indiana, where dollars often go further and neighborhoods are welcoming, have more to offer than many retirees realize.

Bloomington's Benefits

Bloomington is one of those places. The city has an active arts scene, eclectic restaurants, Big Ten sports and plenty of opportunities for lifelong learning. It's an easy-to-navigate city (although not without its congestion around campus and oblivious student pedestrians). The cost of living is low, and health care is accessible, with two hospitals.

There's also the area's natural beauty and outdoor recreation. Located in the rolling hills of southern Indiana in Monroe County, Bloomington is bordered by state forests to the north and east. To the south is Hoosier National Forest and Lake Monroe, the state's largest body of water. The city has a reputation as a biking town -- made famous by the 1979 movie "Breaking Away," filmed in Bloomington.

Invariably, new arrivals find some drawbacks. The Petersons, for instance, were surprised that the town, for all its progressive ways, was a bit behind the times in some respects. Compared to California, building codes were in the "dark ages," Mr. Peterson recalls. (Homes weren't required to have walls tied to the foundation for tornado protection or reinforcement in the concrete blocks of the foundation.) The Petersons also found the property-tax system convoluted. They lobbied (successfully) to get their assessment reduced in line with their neighbors, but find the state's complicated process makes it hard to anticipate next year's tax bill.

And then there's the cold weather.

"It's the ice. For older people, that's an issue," says Mrs. Peterson, 70, who along with her husband owned and operated a residential remodeling company before retiring.

Seeking Vitality

Still, for many people here it's a plus that the city "never grows older," says Mayor Mark Kruzan. "More than half of our population is always under the age of 21." Residents savor quiet summers when students leave and parking is plentiful, but also welcome the buzz they bring back every fall.

As John Simon slides into the wooden bench at Bear's Ale House and Eatery, he doesn't mind being the only person in the place with white hair. "They think I'm a professor," says the 56-year-old who retired to Bloomington with his wife, Ruth, 55. They are regulars in this cozy pub with live music nightly, just four blocks from their home and across from the Indiana University campus with its classic limestone buildings.

"Vitality is the No. 1 reason we moved here," says Mr. Simon, a 1973 university graduate, whose career as a business executive took him to New Jersey, Dallas and finally back to his home state of Indiana. In 1998, he bought a run-down 1922 bungalow for $150,000 for his son to live in while at Indiana University. When the son graduated, the Simons renovated the house and moved in in 2004. The noise of the student festivities flowing into his neighborhood isn't a bother. Mr. Simon likes easy access to the art and music scene on campus.

The nationally known Jacobs School of Music at Indiana University hosts 1,100 performances a year, most of which are free. Big names on the faculty include Joshua Bell (violinist), Sylvia McNair (opera singer) and conductor Leonard Slatkin. The university has one of the largest collegiate opera companies, with seven productions a year. Top ticket price: $35.

"When I lived in big cities, to get this level of entertainment was expensive and I had to fight the crowds," says Mr. Simon. "Now I can just walk." He is president of the Newcomers Club, which hosts 10 to 15 events monthly, from dinners to bridge groups.

The university also gives older adults a chance to feel like students again. Every June, people flock to campus to attend the weeklong Mini University, where professors offer the 500 attendees choices of 100-plus courses.

Steady Housing Prices

Retirees from bigger cities and the coasts do pretty well moving into Bloomington, says Lesa Miller, a local Realtor. In the first half of 2008, the median sale price for a home was $141,000, according to the Bloomington Board of Realtors. The university is a steady employer that cushions the local economy and housing prices from big swings.

While homes close to campus are convenient, they also tend to be older -- and students do get rowdy, Ms. Miller says. Retirees often want one level and are drawn to homes on the south and east sides. New condos and homes with small, easy-to-maintain yards are popping up priced at about $300,000. There are also retirement communities, such as Meadowood, with garden homes and apartments for a monthly service fee that includes 250 activities monthly and bus rides to university football games.

The Petersons, upon arriving in early 2006, bought a new, three-bedroom, 2,700-square foot home for less than half the price of a similar home in Sacramento, Calif., where the couple lived for years. It also was more reasonable than Bend, Ore., where they originally retired but found too pricey.

Bloomington prides itself on being a cultural and liberal oasis in an otherwise conservative state. Rallies advocating universal health care or peace are commonplace on campus. The 100-year-old courthouse in the town square is surrounded by art galleries, an organic-apparel shop, and independent bookstores. Six times a year, the art community hosts a Gallery Walk, with free refreshments and new exhibits.

For those wanting more, Indianapolis is one hour away, with a wider selection of shopping, professional sports, expanded medical services and other big-city attractions.

For a Midwestern city, there is an international flavor to Bloomington, which has a large international student population and a variety of ethnic restaurants. Some retirees tout Samira's Restaurant as serving the best Afghan food anywhere, with its kebabs, vegetarian dishes and fresh nan bread. The lunch buffet runs $8.45. Dinner entrees are under $16.

Not many people retire to a place where the Dalai Lama is a regular visitor. Last fall, Carolyn Bailey, 69, dressed as a Cham dancer (wearing an ornate costume and mask typical of some sects of Buddhism) along with other Bloomington volunteers to greet his holiness at the Tibetan Mongolian Buddhist Cultural Center, founded here by his older brother in 1979. "You have, in the middle of the country, a little bit of the world," says Ms. Bailey, who traveled extensively consulting on board governance and quality management before moving here in 2005 in preparation for her retirement years.

In Search of Organic

Carol and Paul Arnold, who originally retired to Montana before settling in Bloomington in 2002, included a good public library and availability of organic food as must-haves in their search for a home. In Bloomington, they found both. They bought a modest three-bedroom house for $130,000 and like the fact that money doesn't seem to matter much to people. "Everybody wears jeans -- it's a college town," says Mr. Arnold, 78, a retired lawyer.

When the Arnolds decided that dropping $80 for a football game was too expensive, they became soccer fans instead. One free attraction they enjoy is the Indiana University Art Museum, designed by I.M. Pei with a huge atrium and no right angles. Mrs. Arnold, 62, is a docent there. The Arnolds, aspiring novelists with a memoir-writing business, like the creative and young vibe of the city. Seeing students raising a toast at a patio bar on a sunny weekend afternoon, Mr. Arnold says: "It makes me smile to see young people having fun."

—Ms. Adams is a writer in Bethesda, Md. She can be reached at