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Summary:

[153] – State taxes are a piece of your retirement planning puzzle, but are they really a big deal?

In this episode, Jeremy Keil talks about moving to a different state for retirement tax purposes. He goes over the potential trade-offs between lower income taxes and higher property taxes and other costs, the tax implications of living in different states, and the importance of considering factors beyond taxes, such as lifestyle and family connections, when choosing a retirement location.

Jeremy discusses:

Why it’s important to consider the cost of living before moving states, not just the income taxes

Which states don’t currently have an income tax

The trade-offs between lower income taxes and higher property taxes in different states

Why you should try out a potential retirement location at different points in the year before making a decision

Why deciding to move to another state should be based on more than just tax reduction

Why you should plan in moderation

And more

Should You Move To A Different State To Lower Your Retirement Taxes?

Should you move to a different state to lower your retirement taxes? It certainly sounds tempting, but there are a few different things to consider to determine if it’s worth moving to a different state to lower your taxes in retirement.

How does it affect my overall cost of living?

Moving to a different state in retirement can impact your cost of living in various ways. State taxes, property taxes, sales taxes, and other local expenses all play a role. For example, some states have no income tax but might have higher property taxes or other costs.

And on top of that, the cost of living in different areas within a state can impact your overall financial situation.

It's crucial to run the numbers and consider your specific financial situation to determine if the overall impact on your cost of living is favorable.

Are there any trade-offs?

Yes, there are trade-offs to consider when moving states for retirement. While lower taxes might be appealing, other factors such as property taxes, cost of living, climate, and social connections need to be weighed.

Additionally, making a move solely for tax benefits might not lead to the expected financial windfall.

It's important to look beyond taxes and consider the holistic impact on your lifestyle and finances.

Can a trial run help me make an informed decision?

Whether you should move and where you should move to for retirement are two big decisions. 

Playing make-believe and planning out your taxes and costs of living in various locations is a good start to making an informed decision.

Trying out a new location before making a permanent move is also a wise strategy. Spending extended time in a new state during different seasons and experiencing its lifestyle can give you a better sense of what it's like to live there. Renting a place for a month or more through platforms like Airbnb or VRBO allows you to understand the local environment, costs, and overall comfort before committing to a permanent change.

What about my family?

Family considerations play a significant role in retirement decisions, including where to live. Proximity to children, grandchildren, and other loved ones can influence your choice of location. Balancing your desire for a particular location with the need to stay connected with family is essential. Some retirees opt to split their time between different places to be closer to family during certain times of the year. Ultimately, maintaining a strong support network and family connections is a vital factor to consider.

Remember, every individual's situation is unique, and what works for one person might not work for another.