The MetLife Mature Market Institute reports that one in four couples planning for retirement will move somewhere else for the next phase of their life. Many pre-retirees think "warm climate" when they consider their next move (and in late March in the cold and wet Pacific Northwest we understand that sentiment!), but be wary of the state tax bite that might await you if you move to a warmer climate.
The Tax Foundation calculates a state's total tax burden as a % of income. They take into account a state's personal tax, sales tax and property tax in the calculation of total tax burden. As a baseline, Washington's total tax burden was 8.9% in 2008 and Oregon's was 9.4%. Want to move to San Diego when you retire? The Golden State's tax burden was 10.5%, among the highest in the nation. Florida's not too bad -- 7.4%. Arizona's state bite was 8.5%.
But if you really want to save on taxes, consider moving to Alaska where the state tax bite was only 6.4%, Nevada (6.6%) or Wyoming (7%). States with the sharpest state tax teeth are Connecticut, where the tax man took 11.1% of income, New York (11.7%) and New Jersey, where the the state tax burden was 11.8% of income.
I realize that taxes may not be the deciding factor when you think about where you want to live some day, but taxes do play an on-going role in your living expenses. If you're considering moving outside your current state, look into that state's tax structure. For example, states without a sales tax (Oregon, Nevada, Montana, Alaska for some residents), or a low sales tax, have to generate tax revenues some way so they may have high property taxes. If you want to own property in another state, take that into account. You can find out about taxes in a target state by going to that state's web site or the web site of the city or town you're considering. The message is to look before you leap into another state to live.
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