Five Reasons Why You Should Retire in Another State

Category: Financial and taxes in retirement

June 14, 2011 — So you’ve been thinking about your impending retirement. We’ll bet you are wondering where in the heck you should retire to, even if you are pretty sure you will end up in the group of 70% of retirees that never move more than a few miles from home in retirement. This article will give even you some powerful reasons to consider moving a lot farther away, in fact all the way to another state. Most, but not all, of the reasons have to do with money. Part 2 of this series, “Becoming a Florida Resident”, will provide the nuts and bolts of how to… become a legal resident of one of our most tax-friendly states for retirees – Florida. See also our article, “Worst States for Retirement – Updated“.

1. Do you hate winter? If you are one of the many folks from the midwest or northeast who don’t want to be “cold and old”, it won’t much require much persuading to get you to move to another state. Moving farther south, at least for the winter, will let you escape that dreadful cold and those punishing snow and ice storms. You’ll get to enjoy perpetual springs, summers, and falls. But here’s an important thing some folks forget: if you are a snowbird make sure you go far enough south to really escape winter. Even northern and central Florida can be chilly, as can Phoenix. If you retire full-time to one area, however, you might be more willing to endure a few chilly days or even the rare snow or ice storm you might get in Georgia, South Carolina, or the Pacific Coast.

2. Are you paying too much in state income taxes? The obvious solution to this problem is to change your legal residence to a lower tax state. Nevada, Florida, Tennessee, and Texas are 4 southern states that have no income tax. AK, SD, WA, and WY have no income taxes if you are willing to move to a colder climate. See our article, “The Most Tax Friendly States for Retirement” for more details.

3. Do you have a government or military pension? These days government and military pensions tend to be the best pensions out there. So if the bulk of your retirement income is going to come from one of those pension plans, you might want to make sure you don’t lose too much of it to taxes. Obviously if you move to a no income tax state, it’s not an issue. But many states with an income tax have an exemption for government and military pensions, or at least a portion of it, from taxation. It is too complex to provide all details here, but some of the tax friendly states for public sector pensions are Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New York, and Pennsylvania. 15 states exempt all or a portion of military pensions from taxation.

4. Are you getting killed by property taxes? It’s no secret that states in the Northeast and Midwest have the highest property taxes. For example in the New York City suburbs a home does not have to be all that nice to come with a $10,000 property tax bill. States in the southeast tend to be much more favorable, sometimes averaging a $1,000 or even less. Making matters worse in many states like Connecticut are the lack of significant property tax protections for people over 65. In these states your property taxes can soar for 2 reasons: 1) the assessed value of your home goes up dramatically (hasn’t been happening lately, but it has in the past!), and 2) school and municipal tax increases exceed the rate of inflation.

Many states like Florida, however, have implemented circuit breaker and other protections that prevent property taxes from uncontrollable increases. Some states have protections for everyone in the state, while others provide the benefits only for lower income, disabled, or retired folks. See the Topretirements State Retirement Guides or consult the State Department of Revenue websites for more information on this topic.

5. You thought you would never be able to retire – not so fast! At Topretirements we hear this a lot. It is sad how frequently people tell us they are giving up; they just don’t think they will ever be able to retire. To that we say, you do have alternatives.

As Sandy said in last week’s story, “What Sandy Learned After 8 Years of Visiting Active Adult Communities“, if you haven’t visited the communities outside your state you have no idea how affordable some areas can be. There are hundreds of communities in Arizona and Florida where you can buy a nice resale home for less than $50,000. Buying a home in good condition for less than $10,000 is definitely possible. Rents can be had for $500-600, which puts them in reach even for folks on social security (in April 2011 the average retirement social security payment was $1,762 for a couple). Assuming you own a home already in the northeast, chances are you can sell it for more than $100,000, buy a new one in AZ or FL for $50,000, and have $50,000 left over to spend throughout your retirement. You have to live somewhere, so you might as well live somewhere where the living is cheaper and easier.

Now – Find out How to Become a Legal Resident of Another State, and Why That’s a Good Deal
Our related article, “How and Why to Become a Florida Resident”, featuring an interview with Florida attorney Barton Smith, will be published later this week in our Blog.

Comments, Anyone? Please share your ideas and thoughts about moving to a different state in the Comments section below. Your discussions help us all – keep ‘em coming!

Posted by John Brady on June 13th, 2011

24 Comments »

  1. Regarding post: Five reason you should retire in another State.

    You mentioned attorney Barton Smith’s article on Florida Resident, but there wasn’t a link.

    How do you find the article?

    Thank You
    Hi Bill: The article will be available in a few days in our Blog. Not sure what you meant by “How did you find the article”. We just thought this would be an an interesting topic for our members to learn about. We knew Bart is an expert on Florida residency, so we interviewed him about it.

    by Bill — June 14, 2011

  2. Hey, Tennessee has no income tax either.

    Thanks HEF- So true! We corrected that serious omission.

    by HEF — June 15, 2011

  3. In the future, you could perhaps reread your postings for some rather pronounced grammatical errors, one of which changed the way the post sub title was supposed to read.
    I believe it should have read, “You thought you would never be able to retire…not so fast.

    Laurie: You are absolutely right and we were absolutely careless. Thanks for pointing out this error (since corrected). We’ll sit in the corner for a few minutes and promise to do better! John

    by Laurie — June 15, 2011

  4. Michigan just passed a new law reforming the tax structure. I will beginning
    taxing all pensions beginning 1/2011.

    by Paula — June 15, 2011

  5. Sorry for the typo. Michigan will begin taxing all pensions 1/2012.

    by Paula — June 15, 2011

  6. One of the reasons we don’t move to another state is what I call “analysis paralysis.” Most of us live in a certain location because of our job, a spouse’s job, our parents lived there, or it’s where we went to college. When you retire and can choose just about any place in the world to live, there are too many choices, and it can seem overwhelming. So, it’s often easier to stay put, or just move a few miles away from what is known and comfortable. Of course, deciding not to decide is still a decision!

    by Jan Cullinane, co-author The New Retirement: The Ultimate Guide to the Rest of Your LIfe (Rodale 2007) — June 15, 2011

  7. What’s your thoughts on Fla vs Texas as far as property taxes goes. Considering Ft Myers, Fl or DFW area.

    by Bren — June 15, 2011

  8. What would be nice to find out are ballpark figures for the incomes of those retired living in the different active adult communities. In one community, total income of 45,000 a year would allow a couple a very comfortable lifestyle. That may not hold true in a different state where maybe more financial affluent residents reside at.
    Many folks wonder if they can retire. They know what their retirement income is but what may make many folks reluctant is they don’t know if that amount is truly enough to live on. If they found out that ave. retiremnt income in a certain community development was 40,000 and they have figuered out they will live off of 45,000 yr., it would make them feel that they could in fact retire there.

    by Bill-CA — June 15, 2011

  9. Watch the “no income tax” states very carefully. Here in Washington we are almost fanatical about no income tax…but have a sales tax up around 9.5+ % that has to be seen to be believed!

    by Glen DeShaw — June 15, 2011

  10. Reply to Bren:
    I lived in the DFW area for 12 years (8 years in Ft. Worth & 4 in suburban Wise Cty). Although there is no ‘income’ tax on salaries, the property taxes are a 2-fold expense: regular county assesment and a seperarate school district assessment.
    First off, assessments run very high. I always asked myself whether I’d be better off selling to the Appraisal District as they were always higher than market. And even when values were flat (maybe a 1-2% increase) for the most part on Texas RE during the late 90s through 2007, appraisals were at 4-5% increases, especially on the school districts portion. So it was an effort to meet at the appraisal district offices every year to try to ‘beat down’ the appraisal to a more reasonable rate. Most residents there don’t even bother unfortunately.
    I can’t compare to Florida as I’ve not lived there, but may in the future. But I can compare to my more expensive home in VA where my RE taxes are about 1/3d (yes; 33%) of the TX taxes. So even adding a state income tax here, I’m feeling I’m financially ahead.
    I hope one of you Floridians can update us on RE taxes there.

    by Cary Mebach — June 16, 2011

  11. I have been surprised at what great retirement communities are found in Alabama–a state that meets every one of your “5 Reasons”.

    by Dennis — June 16, 2011

  12. Many older seniors are returning to the northern states or to the area where they living prior to retiring. Retirees who moved to Florida, Arizona and other warm areas in the south are returning north. Most go back when their health deteriorates, when their spouse dies or when they are worried about their moneys running out.

    In many cases this is where their children and grandchildren live and where they know their way around.

    by Art Koff — June 18, 2011

  13. Just wondering what you think of NC for retirement. I am hearing a lot of movement is going to that state.

    by Jim King — June 19, 2011

  14. [...] 21, 2011 — The first article in this series, “Five Reasons Why You Should Retire in Another State“, explored the major reasons why it might be a really good idea for you to move from the [...]

    by » Why Becoming a Florida Resident Might Be a Good Retirement Move – And How to Do It Topretirements — June 21, 2011

  15. Thanks for this! A great set of tips for anyone to consider.

    by Luc — June 30, 2011

  16. I’ve have almost 10 years before retirement. How far out should one even consider moving to another area? Has anyone experience with buying a vacation home in the intended retirement area? What was your experience? Good/Bad? What struck you the most about the experience? Thank you!!

    by AJ White — July 13, 2011

  17. I’m planning on selling my home in SC and RENT for a year in another state—son in CA, expensive and daughter in MA, also expensive.
    I should have rented for a few months before I bought. My mistake!

    by Jackie Gaines — July 14, 2011

  18. Living in SC, thinking of south Fla for warmer winters in age restricted community 10-20 miles from east or west coast. Is homeowners, wind, flood insurance expensive? In the event of a major disaster will the insurance companies including the state insurance pool have enough to cover all losses? Will property taxes for a new resident be significantly higher than for current residents? It’s nice to have no state income tax, however will the other costs might negate those savings?

    by Rob — July 15, 2011

  19. [...] For further reference: 10 Worst States for Retirement – 2011 Not What You Thought: The Worst Retirement States for Taxes Most Tax Friendly States Five Reasons Why You Should Retire to Another State [...]

    by » When It Comes to Choosing Your Best Place to Retire – The Most Important Financial and Tax Issue Might Not Be What You Think Topretirements — December 6, 2011

  20. This is an issue I have not seen addressed. OK, so you want to move out of state to a new city or town. But how hard is it to fit into a new community, find new friends, groups to join and activities to pursue? My husband and I grew up in Ohio but have lived in the DC area for 25 years. We are thinking of relocating when we retire because the traffic is horrendous in DC and cost of living high. But where to go? Would there be enough to do in another town? We are spoiled, the DC area is rich in history and activities. Lots of trips, lectures and activities for seniors. We love visiting historical sites. We have established roots in our area now; I belong to clubs and religious groups and have some friends, although my husband is much more shy and quiet and mostly works and comes home. He has pursued few outside activities except some history groups that we both belong to. I am the social one. How hard is it to move to a completely new state and make new friends? We have no children and I have no close family (he has his mother and brother in Florida but we do not want to move there). So this is the decision we wrestle with. Even fianances are not that much of a problem. We will have a nice house to sell and will have our government pensions. We could move back to Ohio but that is a depressed area now and really, not that much going on as to senior activities. Any advice? We would be about 66 when we move–still working now.

    by Karen — December 7, 2011

  21. My husband and I have similar circumstances and will also retire from the DC area with government pensions. We are looking at communities in the Southern Delaware Shore, Lewes, Rehoboth, etc. There are a number of active adult communities to consider. They are not geared to the over 80 crowd but more the 55-70 age group. They usually have community centers, pools, fitness areas, parties, golfing, etc., which make it easy to meet others with similar interests. Even the communities without age restrictions tend to have a large percentage of retired homeowners. Lewes is one of the popular towns that celebrates its historical heritage.

    by Kathy — December 8, 2011

  22. Good morning I hear what both Karen & Kathy are saying. I have just retired and want more from life than a slow pace. Staying active talking and reacting with other people is very important and is the one thing that I miss most. I can find alot of things to do at our home, but being around some of my coworkers is the one thing I miss the most. We are looking at some 55 areas to move to. The key thing is meeting and reacting dayly with others that will keep life and retirement exciting.

    by Brad — December 8, 2011

  23. We are also childless and have very little family, so we understand how some of you feel! My husband is a Mason, and when we have moved before, we have found that we are able to meet people and make friends that way. Volunteering has helped us to meet people, also. If you’re a church-goer, I’m sure that would help, too. We just joined a Unitarian Universalist church, and beside their liberal ideas, they are very active in the community helping others: snow shoveling for shut-ins, reading tutoring at a local elementary school, etc. If you put yourselves out there and find ways to meet your own interests, you will find like-minded folks that probably want to make a connection as much as you do.

    by KimbeeJean — December 8, 2011

  24. [...] 5. Think about where you are going to live. That means writing down your priorities for a number of issues – climate, hobbies, expense, cultural preferences, proximity to family and friends, etc. “5 Reasons Why You Should Consider Retiring in Another State” [...]

    by » Retiring This Year? Here Are 5 Things You Need to Do Now Topretirements — January 17, 2012

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