One of the questions that I get over and over and over again, especially during the first part of the year when everybody’s got to pay those taxes is “Should I move to a state that has lower income tax for retirement?” That’s what we’re going to discuss today.

One thing you definitely need to keep in mind; the grass is always greener on the other side of the fence. I grew up on a farm and I remember that we would always put the fencing, whether it was barbed wire or just hog fence or whatever it was, we always put the fencing on the inside because all of our cows and all of our animals would reach through the fence and try to get the grass on the other side. I mean, there’s perfect grass right here where they were, but they would always want to eat the grass on the other side of the fence.

What’s the point there? A lot of times you see, and you hear stories about something that’s happening somewhere else, and you think, oh wow, that would be great to have no taxes. But I’ve always said this, if they’ve got roads and schools and bridges and other things, they’re getting the money somewhere.

So, you need to go through a checklist and make sure that you’re making the right decision, not just from a tax standpoint but also from other perspectives.

I would start by getting two lists. Number one, I would create a list of every state. If taxes are what’s going to ride your decision, I would create a list of every state where there they do not have income tax. Wherever you go, you’re going to have federal income tax, but look at the states with no state income taxes. The second list I would create is a list of all the other states that do have state income tax and rank them by the tax brackets that are in those states.

Now, I think in every list I’ve ever seen, California leads the pack on that, it’s probably got the highest income tax of any other place. So if you’re checking off just no income tax or state income tax, you can pretty much bet that the other states are going to win that checkbox. But then you’ve got other things to consider from a sheer annual tax standpoint. Is your social security taxed? I know that in California it’s not, but in many other states your social security will be taxed. So, in some of the other states, not all of them, but in some of the other states, you’ve got to check that box. 41% of the average American’s income comes from social security, and in California that social security income is not going to be taxed.

Where in other states it might, how’s your pension going to be taxed? There are some states that do not tax their pensions. It may be a local state pension from working as a state employee in that state. If you worked all of your life in California and you have a California state pension, you’re probably going to get taxed on it, but at least run that through the grid and see which state wins. And finally check your investments. Will your investments be taxed the same way in the state you’re intending to move to? Investments are taxed here in California. So run the gambit. Don’t just look at a state income tax or no state income tax but run the gambit of those annual taxes every single year.

We talked about taxes. Now let’s talk about the cost of living differences.

We want to make sure that when you look at the cost of things, number one, you’re going to probably want to live in a house. So what are the housing costs in that new state? And you can pretty much bet California is going to be up there close to the top, and you’re probably going to get housing at a cheaper rate somewhere else. Another cost-of-living difference? Let’s talk healthcare. What is healthcare’s availability and what is healthcare’s cost in those other states? Now, you can do some work on the internet and find listings on that. There are a lot of states that are listed as to the quality of healthcare.

I know for a fact that Florida has no state income tax and it has a very highly rated healthcare system. And why is that important? Because when you are in retirement, you’re probably going to need more healthcare or have healthcare more readily available to you than you did at other points in your life. So check out the healthcare where you intend to live.

Some other financial factors? What are your property taxes? I was blessed in that my father left me multiple rental units in the state of Texas. Texas has no state income tax. But if you move to Texas, you’ve got to be careful of your property tax if you’re not living in the houses that you own, and they’re rental units. I have to pay upwards of almost 3% property tax every single year on the houses that I own in Texas. Now, they were given to me, but it is a whopping amount and almost as much as I pay for property tax on a much higher valued house in the state of California.

Now, let’s talk about property insurance. Property insurance is almost impossible to get in some of the coastal areas of Florida. You say, why would I move to Florida? No income tax, pretty much a great climate, and you also have some of the best healthcare in Florida. But you might not be able to insure your home. Why? Because they’ve had so many hurricanes and so many natural disasters in recent years that many of the insurers are moving out of the state. Even in sunny Southern California, some of the people are telling us that their property insurance has doubled, or some have even lost their property insurance because of the fire danger and the other dangers that are specific to the areas where they live.

So you got to check a bunch of things out. Check out the lifestyle considerations, it’s also a cost-of-living. My wife thinks when it gets below 60 degrees that we’re having a freezing cold front and she doesn’t want to be outside when it’s below 60 degrees. So when I see some of these lists and they talk about the cost of living and the lifestyle advantages of living in North Dakota and Wyoming and Idaho and Minnesota, she’s going to nuke those right off the bat. I mean, her idea of a heat wave also is when it gets over 90 degrees. So you’ve got to consider other things about lifestyle. Do you like the beach? Do you like the lake? Do you like the snow? Do you like snow skiing? What do you like?

I think the biggest consideration is what I call non-financial factors, and that’s your family. If you’re a grandparent, it’s going to be very difficult for you to move away from your grandchildren. Now you can move away from your kids. That’s probably something you’ve looked forward to them moving out or you moving away. But what I’ve seen so many times, in fact, I’ve seen so many times people are moving away and it doesn’t matter what the cost of living is there. It doesn’t matter what taxes are there. It doesn’t matter what the climate is there. They want to be close to their grandkids and be a part of their grandkids lives as they’re growing up. So where does your family live? That is going to be the biggest non-financial consideration in addition to the climate and in addition to the quality of life issues, that’s going to be the biggest issue.

So, you’ve got to decide. And, as I often say, your decisions are specific to you, your brothers and sisters can’t make and won’t make the same decisions that you make. You have to make the decisions specifically for you.

Hey, if we can help guide you on some of the important questions or can help you particularly about a situation, a question, anything you’ve got, go to the website, get an appointment, give us a call, and we’ll help you out. We’ll see you next time.