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Retiring to higher income tax state... duh...
Old 03-21-2014, 12:04 PM   #1
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Retiring to higher income tax state... duh...

Hi, I'm 57, spouse is 50.5, she works full-time and earns way more, I work 1/2-3/4 time at a non-profit (that's a long and not interesting part of the story). We are frugal but on a vacation trip 2 years ago we bought a house in a coastal town in Oregon, with the idea that it's our retirement place.

I've run through FIREcalc a few times with varying (conservative) inputs and I think we are on track for her to quit in 5.5 years after turning 56. I'm probably going to keep part-time until then. We each have Roth IRAs with some in them, each will get a federal pension, I have a traditional IRA and she has a TSP account (federal worker). The big boost for us will come in 2023 when that can be tapped. 2019, though, the year she can quit, I'm figuring on taking my Social Security and my small federal pension. If she takes her federal pension then, it would be reduced, but I believe we can keep our health insurance and pay the same we do now, which is not too much (~$200 /mo). We are going to a 2-day retirement class in May where I will learn all those ins and outs.

We live in Washington now, high sales-tax and no income tax, while Oregon is the opposite. I believe (haven't done much research yet) that even our Roth withdrawals will be taxed in Oregon, except perhaps the contributions that were made when we lived in a state that had an income tax (Pennsylvania, back in the 1990s). So even if that's so, that's not much of the total Roth balances now.

If anyone has some ideas or experience on how to lower the tax bite in Oregon, I'd appreciate hearing them. Thanks!

Mark
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Old 03-21-2014, 12:27 PM   #2
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.........
If anyone has some ideas or experience on how to lower the tax bite in Oregon, I'd appreciate hearing them. Thanks!

Mark
Right now my plan is to live near Vancouver and shop in Portland.

Sorry, no help here.
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Old 03-21-2014, 12:36 PM   #3
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I believe (haven't done much research yet) that even our Roth withdrawals will be taxed in Oregon, except perhaps the contributions that were made when we lived in a state that had an income tax (Pennsylvania, back in the 1990s). So even if that's so, that's not much of the total Roth balances now.
Very interesting. Are there any members of our illustrious group who are paying state or local income tax on ROTH withdrawals? If so, where?
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Old 03-21-2014, 12:42 PM   #4
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Two day retirement class.? Do not buy or sign up for anything.
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Old 03-21-2014, 01:31 PM   #5
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Last 4 years I just adjusted my ira distributions so that I pay no federal or Oregon tax.
In 10 years when I start taking RMD's things will change.
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Old 03-21-2014, 02:06 PM   #6
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Oregon allows you to deduct $6250 of federal income tax (for 2013) from taxable income? and does not tax social security. You are not taxed on the portion of a federal pension earned for service time before October 1991. I'm planning to retire in Oregon with a federal pension, SS, and TSP and have calculated that my state taxes in Oregon will not be that much more than in New Mexico. Also there is no sales tax in Oregon but the property taxes are a little higher than where I live now. And there is an estate tax (but I plan to spend it all ).
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Old 03-22-2014, 08:35 AM   #7
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We will also be retiring to Oregon, and already have a house there. (We have tenants covering the mortgage and expenses until we are ready.) In our case, we are coming from high property taxes, but no state income or general sales tax.

I have been working on a tentative timeline, with one of the considerations being OR income tax. I expect to retire first, but stay in our current location while DW continues to work for a year or two. During that time I expect to do some combination of Roth conversions and taking long term cap gains before we have to pay OR tax. (OR taxes LTCG as ordinary income.) The first few years we are there, I expect to live off of the proceeds from the sale of our current house (not taxed due to the gain exemption) and maybe Roth contribution withdrawals (which have already had taxes paid). The idea is to minimize taxable income to possibly support additional Roth conversions (even though there will be some OR tax) and/or possible ACA subsidies if still available by then.

I also have a bit in I-series savings bonds, which I won't touch until in OR as they don't tax savings bond income. (I might buy more before moving, but they don't really have any income to tax these days anyway.)

My research does not indicate that OR taxes Roth withdrawals. If someone else knows otherwise, please point it out.

Homestead, I would be interested in more info on how you adjusted your IRA distributions to avoid federal and OR taxes.
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Old 03-22-2014, 09:01 AM   #8
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I believe (haven't done much research yet) that even our Roth withdrawals will be taxed in Oregon
Relax. Oregon makes it clear that your qualified Roth distributions are not included in your income for tax purposes.

Personal Income Tax Overview Appendix
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Old 03-22-2014, 11:19 AM   #9
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Homestead, I would be interested in more info on how you adjusted your IRA distributions to avoid federal and OR taxes.
We use the turbotax tax calculator, plugging in our income, loss carryover, and hsa contributions then adjust the ira distribution until federal tax is zero.
If federal tax is at zero then Oregon state tax is usually very close to zero also.
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Old 03-22-2014, 11:58 AM   #10
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We moved from WA to OR in retirement. Income is SS, Fed pension from work many years ago (exempt in OR), and MRDs. With a standard deduction & OR extra deduction for seniors my OR income tax liability is under $100.

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