January 22nd, 2020
So you’re thinking of retiring out state from Palos Verdes or the South Bay area. Hmmmm. Big decision; huge decision. While this post isn’t intended as the “be all end all” of articles on this subject, my goal is to get you thinking about some things that will have an effect on your decision.
The Palos Verdes and South Bay areas have experienced a lot of appreciation in the last 50 years, 35 of which I’ve been an agent and broker. I’ve seen lots of ups and downs. One factor should certainly be, to the extent that your home is somewhat of an investment – oh I know, they tell us not to think that but let’s be real, for many of us, our homes are our big time investment – what the likely appreciation rates will be in the states to which you are considering moving. Of course thinking about it in such a macro way isn’t a final question, after all Palos Verdes homes appreciate differently than homes in Lennox.
Retiring Out Of State from Palos Verdes or the South Bay
Just today (11/4/2015) the National Association of Realtors published a study of real estate agents’ opinions on their expectations of price appreciation for their states.
Here’s a chart of Los Angeles county price appreciation in the last few years
Here are some tips to consider
New state — new income tax rules. Get to know them!
Familiarize yourself with the tax laws of the state you’re considering for your new home. Two of the top five on Bankrate’s list — South Dakota and Wyoming — have no state income tax, along with five others: Nevada (No. 18 on the list), Texas (19), Washington (22), Florida (39), and Alaska (48.).
Also, an itemized deduction in one state may not be an itemized deduction in another. If you use the long form (1040) to file federal income taxes, hire a reputable, experienced CPA for guidance.
Look into how your new state taxes retirement income. States differ on taxing interest income from tax-free municipal bonds. Some states give tax credits; treat public and private pensions differently; or offer federal, military or blanket exclusions.
The following states are community property states: Idaho, New Mexico, Texas, California, Arizona, Wisconsin, Nevada, Louisiana, and Washington. Speaking with an estate planning attorney regarding how this issue may affect you may be money very well spent.
If you’re married, are you moving to a community property state?
There are nine community property states — those that divide all martially-acquired assets and debt 50:50 in the event of divorce. (Exceptions include an inheritance or gift received by one spouse and maintained separately in that spouse’s name.) Community property states are Idaho, New Mexico, Texas, California, Arizona, Wisconsin, Nevada, Louisiana, and Washington. Speaking with an estate planning attorney regarding how this issue may affect you may be money very well spent.
Have a lawyer review your estate planning documents.
Your existing estate planning documents should be reviewed by a lawyer in your new state of residence because statutes differ on the types of documents required and the powers bestowed upon each. For example, states are all over the map regarding the validity of a power of attorney document and the powers that may or may not be conveyed.
“During their careers, their acquiring wealth years, many people live in places that have lots of jobs — and the higher cost of living that goes along with that,” Friedman says. “In retirement, many they want to move to a state where they can enjoy the same or an even better lifestyle with less money.
“For that, it’s essential to consider not only the cost of living but the state laws that affect your accumulated wealth and income.”
Consider Cost of Living Adjustments
Most of us take it for granted, but a dollar may not go as far where you plan to move. If you want to spend your golden years in Hawaii, guess what, you’re not alone! With limited land, paradise doesn’t come cheap.
If you’ve done well for yourself, and cost of living isn’t such a high priority, Hawaii ranks high as a retirement destination. The life expectancy tops all states at 81.3 years old, and surely the perfect weather and laid back culture has a lot to do with it.
If you happen to live in Southern California and plan on moving elsewhere, the good news is that you’re likely moving to a more affordable place. Websites like CNN Money offer easy to use calculators where you can input an annual income and it will show you what that translates to in other cities.
Let’s face it: quality healthcare is most important when we reach retirement age. That means it’s vital to surround ourselves with the best care options available. Maybe you like the idea of retiring to the country, not only for the peace and quiet, but stretching your retirement dollars further. But what kind of doctors will you have access to and far are they from you?
While deciding on a retirement destination is often framed around finances, there are plenty more factors to consider. A 2014 Bankrate study ranked states based on factors such as cost of living, crime rate, health care quality, state and local tax burden, personal well-being and weather. When those factors were combined the top 5 states were:
- South Dakota
- North Dakota
Obviously weather was only a small factor in these rankings! What it tells you is do your own research, and rank individual factors that mean the most to you, many of which will apply to your unique needs.
The 10 most tax-friendly states for retirees
Kiplinger has a great tool to consider that will help guide your decision process (click on image below to go to the interactive map below this quick home search tool)
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