Moving for retirement tax reasons

[Rustic23]

About 5 years prior to retiring we moved from CA, San Francisco, to TX, Houston. Being a native Houstonian, and having family in Houston, the decision was easy. It was also helped by a severance package for a year paid at CA rates, to live in TX. So while we did not move for Tax/expense purpose, I do feel I have some first hand knowledge.

If family had not been a factor, would we have moved? Absolutely! I could have retired on my other income in TX and would have had to have another job in CA. We were renting in CA and paying about $2,200 a month. In TX our house payment was a little less than $1,000 and that included property tax. Just about everything else is cheaper.

So I am glad we did not have family in CA, because I would not be retired now!

 

[Shawn]

My parents moved from a "high tax" state to a "low tax" state and wound up paying more in taxes. In CA, for instance, SS is not taxed and property taxes are fixed. Gasoline taxes are high, but they did more driving in their new home where car "fees" where also much higher. I lived in a tax adverse county for years and paid a jillion "fees", too. For us, taxes were not part of the equation when deciding where to live. Having recently driven on a dirt road (first time ever!) in a low tax state, I would say that quality of life is worth a few thousnd dollars a year to me.

I saw a table once that estimated total taxes. "High tax" California was bang in the middle of the pack.

Property taxes are not fixed in California. Better said, tax assessed home values are not fixed. My property taxes keep going up and up (both the base amount and added fees).

Many states, including low tax states, either do not tax Social Security or exempt a significant fraction from taxation. Unlike many states, California fully taxes other pension income, including in-state public pensions. California fully taxes interest, dividend, and capital gain income (in my case, at 9.3%, which will not change after retirement, big ouch).

I am pretty sure that they have paved roads in other states. They even have police, fire, libraries, parks, and public schools. Ironically, most of my driving on dirt roads has been in California (e.g., Imperial Valley, Central California along San Andreas fault). I remember visiting the town of Landers following the 1992 Landers earthquake. Impoverished community with dirt roads, at least at that time.

According to this site at Kiplinger, California is one of the highest taxed states for retirees.

None of this means people should not live in California. In my area, I particularly like the climate, general topography (e.g., hills for bicycling), outdoor activities near and far (e.g., local parks, ocean, backpacking in the Sierra's), etc. Of course, one can find these or compatible characteristics in other states too. But taxes in California, pretty much all taxes, are very high compared to many other nice places to live. Depending on one's economic situation (e.g., availability of DB pension), they can significantly impact cost of living in retirement.

 

[steelhead]

Somehow I think that what the move (and the lawyers!) would cost will far exceed the tax savings for the rest of my life.

My effective CA state income tax rate is 0.5%. Property taxes are limited in how fast they can go up, and are loced to the 1987 home purchase price. No sales tax on groceries, our major retail purchase, or on medical care or insurance, our other major spending categories.

Folks really need to take a long, hard look at how much they ACTUALLY pay in taxes before contemplating a move.

+1. California is very tax friendly for us too now that we're retired, for many of the reasons you mention. Less so when DW and I both worked of course, but that's why a person needs to carefully look at one's own lifestyle in evaluating a tax situation.

 

[haha]

None of this means people should not live in California. In my area, I particularly like the climate, general topography (e.g., hills for bicycling), outdoor activities near and far (e.g., local parks, ocean, backpacking in the Sierra's), etc. Of course, one can find these or compatible characteristics in other states too.

I think not, at least in the US. Coastal WA has much that Coastal California has, but where CA is warm and sunny WA is cold and cloudy. Obviously it is a lot more pleasant to go surfing or swimming LA and south than along the WA Pacific coast, and the same holds when you compare the High Sierra to the Cascades. The Eastern slopes up here are drier than Western, but IMO at least California wins hands down.

Ha

 

[daylatedollarshort]

Great thread, all! We've been retired for a couple of years and have always talked about moving to warmer climes. It's daunting at first to decide where to go. I started with "Where don't we want to live?" which narrowed things down considerably!

But seriously, it's really difficult to get one's arms around this! No family considerations here - nothing really keeping us here. If you faced a similar opportunity to pick up, part and parcel, and plant down somewhere else, what helped you the most in making your decisions on where to go?

P.S. We're not in a position to rent someplace for a while first. Would be nice, but not workable.

Thanks for your thoughts.

We have a short list of places to check out. We won't make a final decision until we see where the kids settle post college. If they stay in state we wouldn't move half way around the world, at least not all year.

Our short list isn't too different than most top ten international retirement locations lists. One factor is you have to go where you can get a visa and maybe citizenship or residency down the line. So for 55+ retirees that rules out a lot of countries if you don't already have citizenship or family ties, don't want to work at a skills shortage job, start a business or meet minimum investment criteria.

We moved to where we lived now for jobs we no longer have. Most places we are considering moving we would actually be closer to family or at least no farther than we are now.

 

[Accidental Retiree]

+1. California is very tax friendly for us too now that we're retired, for many of the reasons you mention. Less so when DW and I both worked of course, but that's why a person needs to carefully look at one's own lifestyle in evaluating a tax situation.

For us, too, it's less expensive than we'd realized before we started looking around for another place we might like to live. I never thought that CA would be the least expensive place for us to retire.

Those heating oil and A/C bills that I hear about in other parts of the country amaze me!

For us it comes down to this: we know we could have a nicer, larger house (probably with higher property taxes and higher utilities) in just about any other state.

However, since we don't want to have to stay indoors in that nicer, larger house for half the year -- to avoid extreme temps one way or the other, or the many things on REWahoo's list --we're going to stay in CA and pay the price for the temperate climate we enjoy.

For now....

 

[W2R]

I am pretty sure that they have paved roads in other states.

That's right! We DO have paved roads, by gosh.
.
.

 

[nwsteve]

Before you jump to the conclusion that WA taxes are lower than OR you should look at their many fees. The big one that hit us was an excise tax when we sold our home. That ranges from 1.53% to 1.78% in Clark County.

Brat,
Fraid Oregon is really a pretty tax unfriendly place for retirees. Check out this link from Kiplingers, who includes Oregon on its list of the 10 most tax UNfriendly states. State-by-State Guide to Taxes on Retirees - Oregon -Kiplinger.
I think any retiree facing RMD of any material size will do well to really understand their potential exposures in any state with an income tax.
You can avoid a lot of the fee happiness of some westside jurisdictions (ie Puget Sound) but staying away from the big metro areas in WA. When we moved to Eastern WA from Seattle area, our overall costs dropped substantially--some clearly from downsizing, but also from lots lower sales tax (Bellevue/Redmond/Kirkland's sales tax is pushing 10% while I can still get 6.5% at our local Costco in Clarkston. Even in Spokane, sales tax is no more than 8.5) Not only are our costs lower, we also gets lots more sun!! ;-) and a lot fewer lefties like Seattle new councilwoman who is an acknowledged Socialist. OTOH, gloomy skies and lots of government are some folks cup of tea.

Nwsteve

 

[2035]

Taxes are important, but before I bought a house in a new area, I would rent there for one year. When we lived in Oregon, we watched retirees move to the beautiful northwest (many from California), only to move away after 9 months of drizzly, gloomy skies. And now Oregon and Washington are tagged in worst states to retire FWIW.

I'm back in my home state of California (Bay Area) but have lived in Seattle twice. Call me nuts, but I love overcast weather. My skin never looked so good to boot! Here (east bay) is too hot and dry.

 

[photoguy]

That said, in my situation, I cannot think of a single major tax in California that would not be lower in another desirable state.

I think this depends very much on one's particular circumstances. So much so that I ended up actually using turbo tax to estimate my taxes instead of using the generic guides/calculators found online.

 

[Brat]

Brat,
Fraid Oregon is really a pretty tax unfriendly place for retirees. Check out this link from Kiplingers, who includes Oregon on its list of the 10 most tax UNfriendly states. State-by-State Guide to Taxes on Retirees - Oregon -Kiplinger.
...
Nwsteve

Eh, I am an Oregon retiree and pay less in income taxes than I spent on sales tax as a retiree on Bainbridge Island. Been there, done that one could say. My suggestion is that you buy TurboTax with the State return and run your personal numbers. Don't trust the likes Kiplinger's.

I suppose if you have very significant MRDs and don't buy stuff that is taxable (like nice cars) then WA could be tax cheaper.

East of the Cascades the weather is much sunnier, colder in the winter and warmer in the summer. Housing is cheaper in Wenatchee and Spokane than Bend or Sunriver without a doubt.

 

[robnplunder]

I too was thinking about moving from CA to Nevada for tax reasons. But at the end, I love to play golf year around and decided that was big enough reason to can the idea.

 

[bUU]

I agree. I don't know how anyone can lay claim to "owning" a house there when they have to write yearly checks like that. It would appear to me, the government owns it more.

By that logic, home "ownership" should be limited to people who can afford to purchase large, self-sufficient estates (including their own safety and security, their own efforts to address human rights matters as it pertains to the poverty of the serfs of the estate, etc.), that have no interaction with the rest of the country other than what would be expected between sovereign nations, complete with comparable tariff arrangements between neighboring countries. :shrug:

We have a short list of places to check out. We won't make a final decision until we see where the kids settle post college.

That's a good point. What's the point of moving to PA (in our case) if my brothers' families move closer to NYC rather than staying further west of the metro area? Heck, I have never really discussed what happens later with my brothers (much less my oldest niece). We haven't been seeing each other regularly since we moved away, so perhaps moving back isn't a good idea at all.

By contrast, while my spouse has gone "home" to visit family in TN even less than I have, and by the time we retire the family left down there will be made up principally of younger cousins born after my spouse left the area over fifty years ago, it is more likely that family down there will be far more interested in integrating us into the family - it's a cultural difference. However, that's for my spouse, with me tagging along, and I'm ten years younger, and so I worry what that means for the last five to seven years of my life.

Tough choices.

 

[SteveL]

At retirement, like a lot of people, we had ended up at a place we had been sent by the employer. The house was paid off, the kids off in other states with their own lives. We began to do more of the things we wanted to do other than work, and we began to notice that for half the year, weather made these things difficult to do. Then there was the traffic, really bad traffic. When we had purchased the house in 1980, we were in the boonies. By 2001, we were surrounded by lots of people. Since we were 20 miles from downtown, just getting there to take in a concert, play, etc. became very difficult.

We began think about our overall quality of life where we were, and whether there was a place where we could go that would better fill our needs. We don't like very hot summers, nor cold, rainy winters. We like bike riding, but don't want to fight traffic on a bike. We want to be not too far from Costco. We didn't want a much larger state tax bill. We wanted our cake, and to be able to eat it too.

After a lot of looking, we concluded that such a place didn't exist.

San Diego looked good from a climate standpoint, but housing would be twice as much, state taxes much higher, lots of traffic....One son was in Austin. This was a nice place, university town, lots to do. The traffic was bad. Property taxes were twice as high on equal value houses. Summers were quite hot.

So we have ended up with a 2nd place in So. AZ where we go for half of the year. Given the number of folks here from WA, BC, MN, NY, IL, OR etc. who do the same thing, maybe this is the solution for others.

Think about your overall quality of life, and go where that takes you.

 

[calmloki]

We wandered around looking for a retirement place. No kids, so that wasn't an issue. Prescott AZ came as close as anything weather and beauty-wise if we were looking at a single place, but we ended up with a place in La Quinta near SWMBO's old high school stomping grounds (and not coincidentally some great friends of hers - odd how like attracts like [except for outliers like me]). Only thing is, this place immolates in summer, so we run for the house in Oregon, where all the rentals are.

Tax wise, we are in California and Oregon, so I'm very attracted by the Vancouver Washington area and the notion of selling our Oregon house and scooping up those tax-free gains. Our rental income will continue to be taxed by Oregon - can't do anything about that, but other income could be state tax free in Washington. Unfortunately, not a gigantic savings, and the gal has put out the word that we are NOT sorting and moving our stuff in Oregon, we are NOT dumping the house we spent 5 years rebuilding to our tastes, and we are NOT moving 70 miles north of our established friends in Oregon. Think she's hinting that we are staying put in Oregon as residents.

Damn I'm tempted by the actions of the retired and dual pension drawing school administrator couple who moved 200 miles from California to Nevada and are suddenly state tax free though. Or the drivers of the Washington plate wearing convertible sports cars down wintering here...

 

[Danmar]

We moved to Alberta from Ontario just after retirement. Was not just a tax decision as we wanted to experience mountain living and I wanted to learn to ski. Tax savings have been significant though. I estimate our "take home pay" eg pensions and divs after tax are about 15% higher in Alberta than they would be in Ont. Sales tax is also 8% lower. This is an extreme result but true nevertheless. Doesn't sound like the various state tax rates are that different in the US.

 

[superdave]

Remember, the most important thing to most of us is the people we are around.

Ha

You are one smart dude ha.

 

[Chuckanut]

nearby shopping with no sales tax. Best of both worlds in a way.

Legally, you are supposed to report these purchases to the state of WA and pay the state sales tax. IMHO, our digital world will soon make that much easier for the state to track.

WA more than makes up for not income tax with high sales tax, various fees, and, of course, the highest liquor tax in the nation.

 

[Brat]

There is a reason why the Costco on the Oregon side not far from the I-205 bridge has the highest volume per square foot of all their stores.

Yes, WA residents are supposed to report those purchases but they rarely do. Of course if it is an item delivered by the seller (such as furniture or large appliances) the seller would charge WA sales tax.

 

[Chuckanut]

If the politicians have a choice between raising taxes on the general population and find a way to use technology to get the folks who shop in Oregon to pay the sales tax, I think they will choose the the later. I see this coming. But, I could be wrong.

 

[52andout]

Our kids left NY so we decided to move south when we retired to get out of the 200" of snow a year. After visiting several states and communities, we chose Florida. By doing so our property taxes went from 8,000 to 2,000 on the same priced house. We went down to one car. We can walk, golf cart and bike ride almost anywhere we want to go. Our utility bill decreased $75 per month. We now pay no state income tax. We can have a much higher standard of living here with traveling much more than if we stayed in NY.
Also, we are outside so much and get so much more exercise than in all the ice and snow we are much more healthy.
To each his own. Many people have told me they would never move to the villages where we moved to but they have never been here. Their opinions are based on rumors and suppositions. But I love it here. My kids love to visit and they are happy we made a good choice for us. We can afford to do so much more than we ever would have if we stayed in NY. We have met many wonderful people from all over the country and I only wish we had done it sooner.

 

[W2R]

Our kids left NY so we decided to move south when we retired to get out of the 200" of snow a year. After visiting several states and communities, we chose Florida. By doing so our property taxes went from 8,000 to 2,000 on the same priced house. We went down to one car. We can walk, golf cart and bike ride almost anywhere we want to go. Our utility bill decreased $75 per month. We now pay no state income tax. We can have a much higher standard of living here with traveling much more than if we stayed in NY.
Also, we are outside so much and get so much more exercise than in all the ice and snow we are much more healthy.
To each his own. Many people have told me they would never move to the villages where we moved to but they have never been here. Their opinions are based on rumors and suppositions. But I love it here. My kids love to visit and they are happy we made a good choice for us. We can afford to do so much more than we ever would have if we stayed in NY. We have met many wonderful people from all over the country and I only wish we had done it sooner.

Now that's quite a success story! I am so happy for you because you have found what you really want in retirement.

 

[BuysToys]

I can't say that our retirement move was completely due to tax reasons, but our significant tax reduction from moving was what has allowed us to retire earlier than planned.

We also escaped from NY and moved to TX. Our property taxes have decreased by $5500 per year, our income tax has dropped to zero, the gas taxes are less and the sales tax is the same as what we paid in NY. We started looking at TX because my family lives here. That was the primary driver for our move, but the lower cost of living means that we can retire now if we choose to. So far, DH is still insisting he wants to go back to work, but we'll see how that pans out over the next few months.

 

[Gumby]

I can't say that our retirement move was completely due to tax reasons, but our significant tax reduction from moving was what has allowed us to retire earlier than planned.

We also escaped from NY and moved to TX. Our property taxes have decreased by $5500 per year, our income tax has dropped to zero, the gas taxes are less and the sales tax is the same as what we paid in NY. We started looking at TX because my family lives here. That was the primary driver for our move, but the lower cost of living means that we can retire now if we choose to. So far, DH is still insisting he wants to go back to work, but we'll see how that pans out over the next few months.

But on the other hand

Texas is infested with scorpions, rattlesnakes, fire ants, crazy raspberry ants, cockroaches on steroids, killer bees, mosquitoes, ticks, chiggers, tarantulas, brown recluse spiders, love bugs, swarming crickets, copperheads, cottonmouths, rabid skunks, wild hogs, alligators, oppressive heat & humidity, bleak desolate scenery, dirty beaches, polluted air, dust storms, drought, wildfires, water shortages, recurring floods, tornadoes, hurricanes, rednecks, huge piles of flaming mulch, spontaneously combusting playgrounds, roads hot as flowing lava, the stench of natural and unnatural gasses, amoebic meningitis lurking in area lakes, recurring Ebola virus outbreaks, flesh eating bacteria, staggering homeowner insurance rates, unbelievably high property taxes, mandatory death sentences for DUI convictions, polygamous religious sects, and, lest we forget, doesn't look kindly towards Yankees.

 

[BuysToys]

Quote:
Originally Posted by REWahoo
Texas is infested with scorpions, rattlesnakes, fire ants, crazy raspberry ants, cockroaches on steroids, killer bees, mosquitoes, ticks, chiggers, tarantulas, brown recluse spiders, love bugs, swarming crickets, copperheads, cottonmouths, rabid skunks, wild hogs, alligators, oppressive heat & humidity, bleak desolate scenery, dirty beaches, polluted air, dust storms, drought, wildfires, water shortages, recurring floods, tornadoes, hurricanes, rednecks, huge piles of flaming mulch, spontaneously combusting playgrounds, roads hot as flowing lava, the stench of natural and unnatural gasses, amoebic meningitis lurking in area lakes, recurring Ebola virus outbreaks, flesh eating bacteria, staggering homeowner insurance rates, unbelievably high property taxes, mandatory death sentences for DUI convictions, polygamous religious sects, and, lest we forget, doesn't look kindly towards Yankees.

So far, it's been pretty good! ROFL Our neighbors are forgiving DH for being a Yankee, I grew up in Kansas so most of the pests and weather are familiar to me, and the high property taxes (and homeowner's insurance as well) are still much, MUCH lower than we were paying in NY.

Don't tell DH about the polygamous religious sects, though. He'd probably want to convert!