Moving happens often in people’s lives. When we look at our clients, about 10% move in any given year. According to an estimate from the U.S. Census Bureau, people move at least 11 times during their lifetime.1 Usually those moves are in the same area or city, which can be challenging. However, moving to a new state brings a host of additional considerations.
The decision to move can be driven by reasons as varied as climate, family, health, taxes, or estate planning. We want to highlight some of the top considerations when preparing for such a move. The considerations vary depending on whether you are in retirement or are still working.
Top Five Factors for Retirees to Consider When Moving
Factor 1: Health Care
Be sure to research health insurance options, understand Medicare coverage and review insurance policies for long-term care. This is also true for retirees who have Medicare supplement plans and Medicare Part D for prescription drugs. Retirees typically have to apply for a new Medicare supplement and Part D coverage since these plans are based on state of residence. With respect to medical care, it is especially important for retirees to plan for new healthcare providers and be aware of the hospitals, assisted living and skilled nursing options in their new community.
Factor 2: Taxes
Some states have lower income or property taxes, which could have a significant impact on retirement income and overall financial planning. Also, there may be a difference in how Social Security and retirement income is treated between your current state and your new state of residence because every state has its own rules. If you were granted stock options in one state and you move to another state, the first state may have clawback rules regarding taxation of exercise. Additionally, working out of state or owning a home in two states poses some potential state income tax risk. It is possible that both states will claim you are a resident and that you are subject to their state income tax. This is a complex issue of which you need to be aware and discuss with your tax professional.
Factor 3: Estate Planning Laws
It is important to review and update estate planning documents to ensure they are in compliance with the laws of the new state, including rules regarding wills, trusts, health directives, powers of attorney, probate, and inheritance taxes. In addition, some states impose tax on inheritances and/or estates at varying levels on top of any federal estate tax requirements.
Factor 4: Cost of Living
Retirees should research housing costs, transportation costs and other living expenses to ensure they can comfortably afford their new lifestyle. Some examples are:
- Real estate taxes can vary dramatically and affect cost of living, especially for retirees. Some states have no state income tax, but real estate taxes can be significantly higher.
- You might want to move to the beach but the cost of homeowners insurance can be prohibitive.
- If you are moving to a condo, make sure to check for special assessments and that the HOA reserves are adequate.
- The cost of air travel to visit family (or for family to visit you) should be considered before moving. Is the new location near an airline hub or regional airport with good connections?
- Some states with sales tax rates close to 10% or high gasoline taxes may not generate the abundant tax savings you expected, depending on your tax bracket and lifestyle.
Factor 5: Community Support
Consider the availability of community support services in your new state. This includes access to senior centers, transportation services and other resources that can help retirees stay active and engaged in their new community.
Top Five Factors for Working Professionals to Consider When Moving
Factor 1: The Local Job Market
Research the job market for job opportunities that match your skills and experience. Recently, laid-off individuals who took remote jobs during the pandemic and moved to states with little local opportunity have since struggled to find new job prospects.
Factor 2: Cost of Living
Cost-of-living differences across states can have a great impact on working professionals with the potential to create a large financial adjustment during such moves, especially for families with young children who need child care.
Factor 3: State Taxes
State taxes can vary significantly from state to state. It is critical to research all the tax rules in your new state, not just income tax. Sales and property taxes can have a major impact on budgets depending on your lifestyle.
Factor 4: Retirement Savings
When you move to a new state, you have the opportunity to reassess your retirement savings plan. Consider the tax implications of different retirement savings options and take advantage of any employer matching programs. Depending on the state, it may make sense to defer income into a traditional 401(k) whereas in another state, a Roth 401(k) could make better sense assuming the same income, just because of tax differences.
Factor 5: Estate Planning
Even for working professionals at the beginning of their career, it is important to have a basic estate plan in place. This can include creating a will, establishing a power of attorney and health directives, and naming beneficiaries for assets. Moving to a new state provides an opportunity to review and update estate planning documents to ensure they reflect current wishes and comply with the laws of the new state.
Overall, it is important for both retirees and working households to carefully consider their financial planning and estate planning needs when moving to a new state. We encourage you to work with a financial advisor and other qualified professionals to ensure a smooth transition.
1 “Calculating Migration Expectancy Using ACS Data.” United States Census Bureau, Page Last Revised December 3, 2021.