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I'm still 3-4 years away from retiring, but my DH and I are considering a move at that time. Arizona's state income tax rates are very reasonable, but we have been considering other states for a change. We haven't ruled out Arizona either, there is a lot to like here, but we are checking out the options. We've lived here for over 20 yrs and the heat begins to take its toll. Cooler areas like Flag and Prescott have housing that is too expensive for our budget.
If you moved to another state in retirement (or are also considering a move), how important of a factor was the income tax tax rate to where you moved? For example, I would love to live in Oregon, but their income tax rates look crazy. I don't know exactly what our income will be, but not a lot. I'd say less than 40K per yr. and after paying for medical coverage, who knows?! We'll be in our late 50's so medicare won't be there for at least 5 yrs. I know there are other taxes to consider too, like property taxes, so it all gets a bit dizzying after a while.
I'm interested in what others have experienced after moving and/or discovered in researching places.
When considering state income taxes, it is important to look at the progressivity of the rate structure. You mention the Oregon tax "rates", so I assume you looked at the rates for the amount of income you expect to have, not just the maximum rate. The latter is only important if you have the income to reach that maximum bracket.
You asked a very important question and one that only you can really answer once you understand what all you are giving up and what you are getting out of the move. I have said this a few times on this forum and asked the same thing. It is a question we all (a lot of us really) ask ourselves.
You need to pick a few areas that interest you based on quick criteria like taxes (property and income) factor in other fees, sales taxes. Then weigh them up against what you have in your location now. Then remind yourself that you will need to consider family, friends and support system. Your support system right now includes hospitals, doctors (medical and dental), plumbers, electricians, mechanics (car and HVAC). Weather is a factor as well. Will the move cause you medical trouble (moving to a place with a lot of rag weed for example).
Put all of that together and sometimes the grass isnt greener in the other place. But let's say you go beyond all of those lists and decided you have 4 or 5 places that really interest you. Same zone or different it is fine. Move there and live there for a time. Renting a place will give you a feel but even then some people move back home. They miss kids, grandkids, friends and other family.
Some people can make that move while others regret it.
DM me if you are interested in a couple of websites I have posted here before. It has helped a lot of folks.
I've found that it is all very confusing because States need to make their money somehow. If they aren't collecting money through a state income tax they are collecting money through property taxes. To see what I would be paying in each state that I am interested in moving to, I look up homes for sale in that state. I choose one that is closest to what I would purchase and I look at the amount of property taxes they are paying. Then I do a state tax return based on my assumptions of income in retirement. I add my pretend property taxes to my pretend state income tax and I compare the total to what I am paying now.
You also have to look at sales tax and what items are taxes for this purpose.
Also you have to check out how much property taxes and income taxes can be increased annually. When I moved here this was a less expensive city than where I moved from. However, in the past 8 years it has gotten extremely expensive as housing prices are increasing exponentially and property taxes are increasing right along with them.
Taxes were decidedly one consideration when my wife and I moved following my retirement. Our former state would have taxed our pensions. They've been tax-free here. There are other tax benefits as well, particularly property tax and car registration "tax."
You mention Oregon. Oregon does not tax social security and has no sales tax. If your income is not very large, you should not be in a high tax bracket but I would check that out online. You can also deduct several thousand in federal income tax but that probably doesn't help that much at your expected income level. However housing costs in many parts of Oregon are higher than Arizona as are property taxes and some other cost of living items. You have to look at all the taxes and costs. I'd focus first on finding some candidate areas in different states with an acceptable climate and affordable housing for your budget. Then consider taxes before making the final selection.
And maybe rent the first year.
The less well prepared you are for 'retirement' the more important the tax structure will be. In other words the less income/funds you have, the more the source of that income becomes important. As above, some states do not tax soc security. Some give a break on dividends, some have low sales tax. Low income may mean some portion of your state tax is excused if you are over a certain age. But if you have enough money to buy a home, property taxes may be the offset.
The thing to remember is that federal tax is never dependent on the state you live in, only state tax. The effect may not be huge if your income is near the median level or higher.
All excellent answers! Thank you for taking the time to reply. Lots to think about.
This question is totally off-topic, but does anyone know if there is a difference between giving a person reputation using the scales on the top or using the post rating option at the bottom of a post? I've been wondering...
The fun thing about the 'scales' is that you then have the opportunity to make a short comment that will only be seen by that person.
Good point, I do like that feature...but other than that?
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Lots to think about.
