Important Considerations Before Retiring in Another State

Mar 13, 2023

retired couple, the police credit unionWhile many residents of the Golden State have no burning desire to relocate to another region of the country when they leave the workforce, others are making up a sizeable portion of the Californians flocking to other states such as Arizona, Florida, Texas, North Carolina, Tennessee, Idaho, Oregon and more. Many are pulling up stakes seeking lower taxes and a lower cost of living, but may also be drawn to new experiences and a change of environment or pace of life. The desire to move closer (or farther away from) family factors into the decision for many too. If you are exploring the idea of retiring in another state, these considerations can help prepare you for a decision that you won’t come to regret:

It can pay off to be realistic when evaluating the full spectrum of tax consequences on your finances and quality of life.

Although certain states are unquestionably more tax-friendly than others, it is essential to get a complete picture of how a move will impact your overall tax burden as it applies to you and your individual circumstances. Potentially, you’ll want to account for any property taxes, capital gains taxes, sales and excise taxes, and estate and/or inheritance taxes. If you plan to own a business, state and local business taxes may also apply.

Taxpayers must pay personal income tax to the federal government, and in 41 states and some local municipalities. However, states without an income tax will often make up this revenue with larger property, sales or excise taxes, or with services that are reduced, or lower-quality or more expensive. More generally, a lack of taxes in some areas may be offset with higher rates in other areas.

For instance, Oregon has no sales tax, but the state’s personal income tax rate is one of the highest in the country, although a credit known as the “kicker” can allow some of these taxes to be returned in certain years when there is a revenue surplus. Another example is New Hampshire, which has neither a sales or personal income tax for earned wages, but has been cited as having the second-highest effective property tax rate among all 50 states and the District of Columbia.

A simple way to get an overview of a state’s general affordability when it comes to taxes is to check the state’s total tax burden, which measures the portion of personal income that residents pay in state and local taxes. To find out how your target state measures up, visit Balancing Everything. You can also find “9 of the most tax-friendly states for retirees who want to save money” at Insider.

A few words about death taxes:

Most people don’t have assets that rise to the dollar value that would be subject to the federal estate tax. However, certain states may tax your estate, inheritance, or both, so it’s advisable to investigate whether these “death taxes” would impact you and your heirs, and to what extent. You can find a helpful quick read on “17 States With Estate or Inheritance Taxes” from AARP. But as always, it is advisable to consult a professional with trusted expertise when it comes to an aspect of your finances as critical as trust and estate planning.

While it’s important that you know how each of your tax components fit together to affect your cash flow and budget, it can be helpful to maintain perspective when it comes to taxes. As you know, your tax bills are far from the only factors to consider when it comes to comparing the cost of living in another state. Moreover, lower taxes in some cases can mean trade-offs when it comes to services and infrastructure, so you’ll want to be aware of these quality of life considerations as well.

Be sure to take energy costs and homeowners insurance into account.

When calculating a move, you’ll clearly want to weigh what your rent or home price might be, along with ongoing costs for health care, fuel or transportation, groceries, dining out, entertainment, parking, and more. But make certain not to overlook energy costs and homeowners insurance, because these two items will vary a great deal from state to state. According to the consumer site Finder, average energy costs vary from as low as $104 per month in Idaho, to as much as $321 in Hawaii, adding up to a difference of more than $2,600 per year.

When it comes to home insurance policies, the premiums for two homes that are of equal value but located in two different states will often vary to a large extent, primarily because of different risk factors, including natural disasters. According to, the average annual home insurance cost for $400,000 in dwelling coverage would be $6,387 in Oklahoma but only $1,741 in California. In general, states that tend to get hurricanes, hail storms and tornadoes often have the highest insurance rates.

You’ll need to find new health care options — and these costs may change as well.

When it comes to preparing for retirement years, access to quality healthcare facilities and a network of competent physicians and medical specialists that you trust can take on a new level of importance. But even if you are quite youthful when you decide to relocate, you’re still going to need to find new providers, and will want to find a health plan that meets your needs in your new locale. Don’t assume that your current health plan can be transferred with you to another state, because in many cases, it is restricted to a specific service area (even Medicare Advantage). In general, if your plan has an established network for healthcare providers, you are going to need to make changes when you move. When evaluating your options, be sure to consider premiums, deductibles, out-of-pocket costs and your prescription coverage.

An extended stay before you relocate can give you a better sense of whether you would be happy with the move.

If you’re contemplating a move to a new state, the concept of leaving behind family, friends and your support system has most likely already factored into your emotional considerations. But don’t forget practical issues like convenience to stores and restaurants, and the need to learn your way around a new area, find a new hairstylist, etc. One of the best ways to find out if you would be comfortable living in a totally new environment is to plan a long stay before you commit to moving. Not only will this give you a better indication of whether you like the area in general, but it will give you a sense of different neighborhoods and communities, and which might suit you best in terms of convenience and lifestyle.

And if you do decide to relocate, be aware that moving out of California does not have to mean giving up your membership with The Police Credit Union. When you join our credit union, you can remain a member for as long as you want, regardless of whether you move, make a career change, or retire from law enforcement. What’s more, with our ability to provide VA and FHA Loans, we can now offer our members out-of-state mortgages. FHA Loans feature down payments as low as 3.50 percent, fewer credit restrictions and the ability to use a non-occupying co-borrower for qualifying provided that this person is a qualified family member. A VA Loan is a low-interest loan for U.S. military members, both active-duty and veterans, with no down payment or mortgage insurance required. For details on both loans and to apply, visit us on our site here.

Looking for a VA or FHA Loan? The Police Credit Union can help!

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