General Discussion > Post-FIRE
To move or not to move after retirement
Roadrunner53:
We live in CT and of course as everyone knows a high tax state. People seem to expect that when you retire you will automatically move. the first thing out of a persons mouth when they find out you are retired is "are you moving?". Trust me, we have considered it many times. Right now we are in a low tax bracket due to being on Obamacare and have kept below the 400% poverty level to get the subsidy for the insurance. August I go onto Medicare and 2019 no longer have to worry about falling off the income cliff.
Once we have to draw on our IRA's with the required minimum distribution is when we will get his hard with taxes. Right now I have an inherited IRA I have to pay 15% Fed tax and 5% CT tax. Because we are low income, we get it all back for now.
I am assuming that there is no way around the 15% Federal tax on RMD no matter what state you live in. Some states like GA waive taxes on up to $35,000 per person age 62-64 then $65,000 at age 65 and over. In certain counties in GA there is no school tax for seniors. Taxes on some homes with no school tax are like $1,300 compared to my town tax of $5,000+/- for cars and house.
When RMD occurs I will have to pull out around $35,000 (yr) with the 5% tax that would be $1,750 plus let's say a savings of $3,500 on house taxes. A total of $5,250 a year. Is there something else I am missing?
If I moved to GA I would save approx. $5,250. Is it worth moving if I am only saving $5,250 a year?
We have no children or close relatives here so no real ties but we have lived in our paid off house since 1975. Long time to never move. Also, do know a few people in GA but they are not very communicative so I can't seem to feel them out on things.
If we live 15 years while drawing RMD we would might save $100,000. Can't calculate that because RMD increases each year. Plus, taxes will increase each year.
I wonder if there are any kind of workbooks to help guide a person thru the 'what if, what do I do process'. And some kind of software that isn't too complicated to use?
6-Saturdays:
So to give you an example, I currently live in Galveston TX plan to FIRE in little over a year. I know that Galveston is not my forever home. While it's a LCOL to MCOL area it's not where I want to be long term. The summers are brutal and the threat of storm damage is too high. My wife and I have a home in Mexico that we plan to move to for fairly long term. We love the area, great weather, low cost of living, good community, etc. So in one way we are going to a lower cost of living area but that being said I would never recommend someone move just for the COL. I think you need to be moving to something you want and not just away from higher taxes. My advice: If you love where you are stay, if you are indifferent to where you are look around for something you like better if it comes with a lower COL bonus, if you don't like where you are make a change. That's the beauty of being FI, you have the INDEPENDENCE to change your situation to titrate your happiness level.
Roadrunner53:
Good points 6-Saturdays. I don't hate where I live but I am beginning to resent our school system here. We closed a whole school and that very year school taxes went up more. Less kids enrolled, one less school, less teachers but higher taxes. Not one year they could hold steady or lower the taxes. Our state is in dire straights as far as debt. They are withholding school tax money that has always gone to towns so the towns people have to make up millions that should have gone to the schools on top of the schools increasing the budget. We pay more school tax than town taxes. That is one reason GA is appealing to us. CT pays around $18,000 a kid per school year.
Yes, moving to something...lower taxes?
Starting over in somewhere new sounds appealing too.
seattlecyclone:
--- Quote from: Roadrunner53 on March 15, 2018, 11:30:42 AM ---Once we have to draw on our IRA's with the required minimum distribution is when we will get his hard with taxes. Right now I have an inherited IRA I have to pay 15% Fed tax and 5% CT tax. Because we are low income, we get it all back for now.
I am assuming that there is no way around the 15% Federal tax on RMD no matter what state you live in. Some states like GA waive taxes on up to $35,000 per person age 62-64 then $65,000 at age 65 and over. In certain counties in GA there is no school tax for seniors. Taxes on some homes with no school tax are like $1,300 compared to my town tax of $5,000+/- for cars and house.
--- End quote ---
There is no "15% federal tax on RMDs." These withdrawals count as regular income and are taxed at your regular tax bracket that varies depending on income. Maybe you're having 15% withheld for some reason? But you state you're getting it all back anyway, so it's not as though you're actually paying 15% in the end, right? That alone doesn't seem like a strong reason to move; local taxes might if they are outrageously high compared to other areas and you don't have strong ties through friends or family that are keeping you where you are.
Roadrunner53:
When the financial advisor pulls out money for us each year she takes out 15% for Fed and 5% for State. I guess it is the tax bracket we are in is how it is based. When we filed our taxes, we got the money back. However, once RMD's kick in, then it will be more of an issue. If we were to move, I would like to move before age 70. We have no family ties here.
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