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I dont understand why everyone is counting 100% of SS as a tax. I will have paid about 200k into SS when I retire, (max that can be paid in over previous 37 years) with my company paying that again. At FRA I will start with about 40k in SS income. So as long as I live 15 years, for my "premium" I fully expect to get every cent back and then some. Plus the security of survivors benefits. And as noted, the higher your income and more you paid in the lower your rate of return.
On an aside, call me naïve, but I never knew that federal employees paid in to their pension plan or could get it out as a lump sum. So a private non-contributory pension, though often smaller (usually 50% of average of 5 highest years) plus company match to a 401k plus SS is actually a pretty good deal by any measure. I always heard these high government pensions but never knew there was no 401k or SS and it was contributory.
Perry that is one reason I always attempt to correct people who complain about government pensions by saying well we do not have them in private industry any longer. I like to ask if the employee picked up 67% of the cost of a private sector pension do you think they would still be available? In NJ that is the ratio- the employee contributes 67% of the funding formula.
I dont understand why everyone is counting 100% of SS as a tax. I will have paid about 200k into SS when I retire, (max that can be paid in over previous 37 years) with my company paying that again. At FRA I will start with about 40k in SS income. So as long as I live 15 years, for my "premium" I fully expect to get every cent back and then some. Plus the security of survivors benefits. And as noted, the higher your income and more you paid in the lower your rate of return.
On an aside, call me naïve, but I never knew that federal employees paid in to their pension plan or could get it out as a lump sum. So a private non-contributory pension, though often smaller (usually 50% of average of 5 highest years) plus company match to a 401k plus SS is actually a pretty good deal by any measure. I always heard these high government pensions but never knew there was no 401k or SS and it was contributory.
Currently FERS employees hired after I think Jan 2014, are paying 3% of their pay to pension. This is on top of saving in TSP if they do. It won't be long and people will just do a few years in government service to begin the TSP and get a smaller portion of their income for pension. You are vested after 5 years so that is 5% as a minimum of your high three once you reach I think 62. There are also going to be fewer people making a 20 year career of the military as well. They are asked to fund more of their pensions as well.
Perryinva just started a new thread asking virtually the same question that I set out to answer by starting this thread, so I am bumping it to make it easier for Perryinva to find. I am a bit mystified as to why he is reinventing the wheel here, as he himself posted in this thread. Perhaps he is asking a slightly different question and I failed to pick up on that.
Have you gone back and reread this thread? There were actually 5 answers in 7 pages! And two of them are nit fully retired yet. I honestly don't care how much is actually paid in taxes, more like what I listed in the other thread, what IS taxed, and rates. I think you originally meant the same thing, but instead the thread got derailed to comparing the same house in Ca vs Tenn, or pension differences, etc. I like NEs answer that she looked in to NH vs Taxachussetts because most New Englanders know NH is cheaper to live in than Mass while you're working, but, tadaa! not so much, once you're retired because of the very high property tax. I have a friend that lives just north of Chicago, and our houses are comparable in worth, though my oocation relative to desireability is higher,nand he pays over $11k in tax vs my $4300. Pensions are not taxed in IL, but again, the difference in real costs makes VA Much cheaper. The other posters are probably right, this might be a futile exercise, as too many apples, oranges and kumquats to make a meaningful comparison. The bottom line is states that have the most people getting the most aid with the lowest average incomes are more expensive (CA &NY) than states with a lot of people that have income and less people getting aid (ME, WI).
Perry, as I posted in this thread a long time back - you can start your search for a low-tax place to retire with the handful of states that have no income tax, I know for example NH does have high property taxes - but the no income tax states as a class tend to be low tax.
On the other hand the high-tax states are "hiding in plain view" - NY, NJ, CA, MA, etc.
Someone else suggested to look at the # of state employees per capita, or alternatively what % of employed people in that state work for the state.
This is such an individual thing though - beyond the valid point that it makes no sense to live somewhere you don't like just because it's a bit cheaper than some other place - very much depends on how you live. Some states tax a new and expensive car heavily, some like WA charge the same for a tab to put on a Kia or a Lambo. Some impose sales tax on every purchase, some don't tax food, some like OR don't have a sales tax. As you noted some states that tax income from work or investment heavily don't tax pensions or SS at all. So it depends on how "high on the hog" you can live and want to live.
Beyond that - do you want to live in a city proper, a smaller town, or out in the country? Your answer will probably change if you change urban to rural.
Perry, as I posted in this thread a long time back - you can start your search for a low-tax place to retire with the handful of states that have no income tax, I know for example NH does have high property taxes - but the no income tax states as a class tend to be low tax.
On the other hand the high-tax states are "hiding in plain view" - NY, NJ, CA, MA, etc.
Someone else suggested to look at the # of state employees per capita, or alternatively what % of employed people in that state work for the state.
This is such an individual thing though - beyond the valid point that it makes no sense to live somewhere you don't like just because it's a bit cheaper than some other place - very much depends on how you live.
Simply because a state does not charge income taxes, does not mean they are low taxed.
We have owned apartment complexes stateside in Ca, Wa and Ct; and we have resided in Va, Ga, SC [as well as over-seas obviously]. I assure you that COL and taxes most certainly do impact where a pensioner can live.
When we were in the Ca, Wa and Ct residences, we were planning for my eventual retirement. My pension is not very much, if we had returned to any of those states, my retirement would be dependent on government aid. My retirement year was set in our minds 15 years before it happened. We had a lot of time to look around and plan for it. We went through 7 homes in that period of time, planning and searching for retirement options in each of those different regions. It was easy when I had a much larger salary, and we had a good deal of rental income.
Where you live can make a huge difference in how much it costs to live independently.
Quote:
... Some states tax a new and expensive car heavily, some like WA charge the same for a tab to put on a Kia or a Lambo. Some impose sales tax on every purchase, some don't tax food, some like OR don't have a sales tax. As you noted some states that tax income from work or investment heavily don't tax pensions or SS at all. So it depends on how "high on the hog" you can live and want to live.
Beyond that - do you want to live in a city proper, a smaller town, or out in the country? Your answer will probably change if you change urban to rural.
It's true that a state that has no income tax is not necessarily a low tax state - but most/many of them are. Washington is a hybrid - rural east side can be quite low COL, but if you move in next to Bill Gates you can expect much higher expenses. Tennessee has reasonably low taxes in most places and relatively cheap electricity as well. Texas and Wyoming get a lot of their state budget from mining and oil, so, they don't shake down their citizens as badly. Alaska is the most extreme example - you get a check instead of a bill for living there (apparently, I have never lived there).
A lot of one's COL is tied up in how well or not one adapts to the environment he's in. With an appropriate lifestyle and a rent-controlled apartment, even NYC can have a relatively reasonable COL.
A slightly off-topic example is Moscow (the real one) - if an English-only speaking tourist heads for the bright lights like a bug, he (or at least his wallet) will suffer a similar fate. But I have had very pleasant and reasonably priced vacations there, because I know how to "go native" and "do as the Muscovites do".
I'm one of those people who is thinking of moving and trying to compare the taxes and cost of living. To compare the taxes I do the following:
1. I go to the IRS's sales tax calculator found here: Sales Tax Deduction Calculator and I enter my income, the zip code I want to move to, I claim I have been living in this zip code all year and did not move. The IRS then tells me based upon my income how much I would have spent in sales tax. This isn't a perfect method, but it is reasonable.
2. I look up a house that is for sale on the internet that is comparable to something I would buy. The listing usually tells the cost of property tax. I also check the website of the property appraiser's office to see if the property tax is listed there.
3. I print out a state income tax return (if one exists) and instructions. I read the instructions and I fill out the form.
4. I call the Department of Motor Vehicles in the state and I ask what the cost is to register my car
5. I call an insurance agent. I give them the address of the house for sale that I used in #2 above and I ask for a quote on home owners insurance and auto insurance. If I had to pay for health insurance I would do the same thing for that.
I compare everything to what I am paying now. It is a lot of work but it gives me pretty accurate data based on how I would be living.
I dont understand why everyone is counting 100% of SS as a tax. I will have paid about 200k into SS when I retire, (max that can be paid in over previous 37 years) with my company paying that again. At FRA I will start with about 40k in SS income. So as long as I live 15 years, for my "premium" I fully expect to get every cent back and then some. Plus the security of survivors benefits. And as noted, the higher your income and more you paid in the lower your rate of return.
I question your math since I have similar numbers and have worked through this. The maximum possible check at FRA is $32,748. If you defer to age 70, it bumps to $41,664. You also have to adjust for inflation in your calculations. If you have 35 years of max contributions, you put $18,700 of 2015 dollars into the system and your employer put $18,700 of 2015 dollars into the system every year. That's about $1.3 million dollars. You'd have to live to age 100 to break even collecting at FRA if you calculate accounting for inflation.
Social Security is a "tax" in the sense that it is progressive. After you adjust for inflation, if you are high income and paid the maximum amount into the program for 35+ years, actuarially, you'll receive less in pension than you and your employer contributed in payroll tax. The working class person with 35 years of Social Security receives, inflation adjusted, more than they and their employer contributed to the system. I'm high income. I have no problem with this. It's part of living in a Social Democracy and we've been one of those since FDR. It's just less of a Social Democracy than other 1st world countries since we haven't addressed our health care mess. As I've written elsewhere in this forum, I view Social Security as being the most successful social policy in the history of the United States. It has pretty much ended elderly poverty. The disability part of it is broken and needs to be revamped but the retirement side of it is the exact right public policy. Maybe the ages can be tweaked to reflect modern medicine and the fact that most people don't do physical labor like they did in the 1930's. Age 62 is a bit low. Most people can still work at age 62. That wasn't the case 80 years ago.
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