Fidelity Retirement Planner & State of Residence

[Yipper]

So I've been using the Fidelity planner for a while and have just started playing with state of residence setting in order to see how it calculates the tax impact of various retirement locations.

Since I'm now in New Jersey, I've gotten used to the idea that having a primary residence here would be foolish due to the HCOL - especially housing costs (amount of capital tied up + insane property taxes).

However, when changing the "Primary State of Residence" setting in the "Taxes" section - it seems to indicate NJ being better than SC or NC or even PA (which I don't believe taxes 401K/IRA withdrawals).

Why would this be? Seems very unintuitive and not what I'd expect.

Here's the Fidelity Planner link for those that haven't tried it - I think you can use it as a guest as well:

https://www.fidelity.com/retirement-planning/overview

 

[schenbew]

Yipper - I cant be certain, but in my FRP plans taxes appear to be manipulated behind the scenes, and arent broken out in a separate column. Small print towards the end of the FRP analysis (generated after you "Save" a plan as a PDF) states:

"Certain income taxes have been assumed and estimated, but they may not reflect all taxes applicable to your specific situation. The Retirement Analysis assumes that any assets in a non-Roth individual retirement account (IRA) are held on a tax-deferred basis and that the entire amount will be subject to ordinary income taxation upon distribution."

Property taxes need to be captured in the detailed monthly expenses - keeping track of constantly evolving property taxes across every town and county in the US would be nearly impossible. To compare different state property tax rates requires you to estimate those future property taxes.

I live in NC, where SS is exempt from income tax, but nearly all other income, to include pensions (with a few exceptions...) are taxed at a flat 5.25%. As a former member of the Garden State, I pay less in property taxes than my DB despite having a house valued 3x more than his.

Consider Pralana Gold if you want to do higher fidelity planning, though even it can not estimate property taxes - again, you would need to provide that info.


Good luck on planning for your future.

 

[latexman]

I think the reason you just started playing with state of residence is, it's a relatively new feature. I've used the planner for 5-10 years, and it's new to me. Right?

 

[Yipper]

Property taxes need to be captured in the detailed monthly expenses - keeping track of constantly evolving property taxes across every town and county in the US would be nearly impossible. To compare different state property tax rates requires you to estimate those future property taxes.

That makes sense and I've read the 'fine print' but figured they might do some kind of "state averaging" for something like property taxes.

I live in NC, where SS is exempt from income tax, but nearly all other income, to include pensions (with a few exceptions...) are taxed at a flat 5.25%. As a former member of the Garden State, I pay less in property taxes than my DB despite having a house valued 3x more than his.

Consider Pralana Gold if you want to do higher fidelity planning, though even it can not estimate property taxes - again, you would need to provide that info.

Good luck on planning for your future.

Thanks - I know that feeling as my DB is only 15 mins away in Pennsylvania with a house about the same value as mine (twice the size) and pays half the property taxes. Plus - his 401k/IRA isn't taxed by the state either.

I'll check out Pralana Gold - never heard of that one.

 

[tmm99]

Some stuff seems to have changed with the FIDO planner. I used to be able to enter a specific effective tax rate as well, but it won't let me do that anymore . It seems to do the tax calculation behind the scenes, which makes no sense...

 

[qwerty3656]

Some stuff seems to have changed with the FIDO planner. I used to be able to enter a specific effective tax rate as well, but it won't let me do that anymore . It seems to do the tax calculation behind the scenes, which makes no sense...

I agree. Most of my money is in Roth's - I would like to see how they are assuming it is taxed.