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“Relocating for retirement and trimming the budget line for taxes are among the many tasks preretirees and retirees have on their to-do lists.”

There are states where taxes are lower than others. However, if you plan to move to a state that has low tax rates or tax breaks designed to help older residents, make sure to look at the entire picture, advises the article “Should You Relocate to Trim Taxes in Retirement?” from Kiplinger.

Especially now that tax reform has put the kibosh on the federal deduction for state and local income taxes (SALT), seniors preparing to leave the workplace are feeling the tax pain more than ever before.

There are some savings to be had by moving from a high-tax state to a low-tax state. If you live in a state like New York or California, and move to Florida, you’ll definitely enjoy the fact that Florida has no state income tax.

However, a quick fix isn’t always the solution. If you move to Dallas or Seattle, your property taxes will take a skyward leap. If you end up flying back to your hometown several times a year, how much will you be saving? If you continue to earn income in the state you leave behind, you’ll need to pay non-resident taxes. Not paying could cost a hefty sum.

There are other costs associated with relocating. High-tax states, including New Jersey and Connecticut, are actually doing their best to make it hard to leave, imposing tax surcharges or tax prepayments on high-end homeowners who relocate. You’ll need to be extra detail-oriented about establishing residency in your new home state, from signing up with a new network of healthcare providers to joining a local neighborhood group. High tax states have become super-aggressive about investigating former residents. Just keeping a pocket diary of the dates you live in another state or saving receipts from E-Z-Pass to document your travels won’t be enough. You’ll really need to cut ties with your old state.

Losing that SALT deduction has meant that people who might have stayed in a high tax state in the past, are heading for the exit.

Moving can be financially beneficial, even if you’re not in a high-tax state. If retirement income is limited to a pension and IRAs, moving to a lower cost state can give you a pay raise. For one New Jersey resident, the realization that two months of property taxes in New Jersey would cover his entire year of property taxes in Florida was all the impetus he needed to set his sights on the Sunshine State. By moving South, he’s also getting rid of state tax payments.

There are several bills in the U.S. House that might raise or eliminate the SALT deduction cap. That cap is scheduled to expire, along with other provisions of the 2017 Tax Cuts and Jobs Act after 2025.

If you do move to another state, remember that each state has its own estate laws. Therefore, you’ll want to be sure to meet with a local estate planning attorney to be sure that your will, power of attorney and other documents are valid in your new home state.

Reference: Kiplinger (Oct. 28, 2019) “Should You Relocate to Trim Taxes in Retirement?

“Congratulations! Your retirement planning paid off. You built a $1 million retirement nest egg. How long will $1 million last in retirement?”

For most retirees, the goal is simple: don’t run out of money. That’s the worry that plagues most Americans—61% of them, according to a survey from Allianz Life. How do you keep that $1 million from running out before you do, asks Investors Business Daily in the article “How Long Will Your $1M Last in Retirement?“.

Let’s use this example. A person is 65 years old, earning $115,000 annually. It’s not a king’s ransom, but it’s a decent income. They sock away a good-sized amount of money every year, but not so much that they reach income limits in a 401(k) or similar retirement plan.

The simple answer to the how long will $1 million last is less than nine years. That’s if the person spends $115,000 a year from the $1 million.

The average American life expectancy is now 78.6 years, as of 2017, according to the CDC. However, if you make it to 65, you’re more likely to make it to 20 more years. For the average person, that means living to around 85. Retirement funds in this case, which is admittedly an average, will need to last twenty years. Will they?

That nest egg isn’t done growing, just because you’ve turned 65. Given enough time, even including setbacks in the market, you’re likely to have a nest egg that keeps growing over those twenty years. If you use a 5.6% annual rate of return for forecasting how your portfolio will do, you may be in better shape than you thought.

A 5.6% return would grow your portfolio to $2.97 million, even at a 5.6% growth rate. However, that’s without subtracting any money for living expenses every year. Let’s plug that in.

You’ll be getting Social Security, so you won’t be taking out $115,000 every year. While the size of benefits may change in the future, there will still be income. For a 65-year-old earning $115,000, expect to receive about $27,815 from Social Security annually.

That’s $87,185 to maintain your current lifestyle, from retirement savings, any part-time income or other sources. Let’s say you don’t want to work, and it all has to come from savings. Don’t forget inflation, which will come in at some point. U.S. inflation is now 1.7%.

It looks like your $1 million will last about fifteen years now. Will that be enough? Downsizing to cut housing costs will help, as would part-time employment. You should also make sure that you have long-term care insurance to protect you and your family from one of the biggest health care costs.  However, people with $1 million can pat themselves on the back—well done!

Reference: Investor’s Business Daily (Oct. 28, 2019) “How Long Will Your $1M Last in Retirement?

For more information on elder law, retirement planning and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.