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Things to consider when planning to relocate out of state

September 09, 2020

Retirement is not the only reason to relocate to another state, but it is one of the most prevalent. Of course, career change is another reason many people relocate but here in California we have a plethora of reasons one might consider a move; cost of living, taxes, regulations, crime and more. So, what are the important factors to consider before choosing your destination goal?
We like to split this in two major categories, lifestyle and financial. Lifestyle will help you determine if your destination community has access to activities and services desired. Community compatibility is important. Maybe going out to the theater to see a play or concert is your cup of tea. You may be more interested in throwing a rod and reel in the back of the truck and chase that ever-elusive prey. Perhaps you have an appetite for both. Then you must consider a community which offers both within reasonable proximity.
Speaking of travel, you must consider the distance to an airport for trips to see family and friends. Being close to an airport may be an important factor in your decision making. Driving long distance to get to an airport or possibly the higher costs of longer flights may discourage you from traveling as much you may hope to do. If you are closer than flying distance it may be less of a consideration.
One of the most important things to consider are health care services. As we age, these services are needed more and more. Living in the country on five acres with no one in sight might sound ideal but when you need to drive an hour to make a health care appointment maybe a little less so. Along that line of thinking is the actual level health care services available. If you are a cancer survivor being close to quality oncology care is critical and the same should be considered for any specialist, you may need. Personally, I do not know anyone who has not been touched by this terrible disease at some level and I bet that you do not either.
Services go beyond health care. For retiree’s senior advocacy programs, access to local transportation, social clubs and more should be considered. For the younger crowd look for activities that will keep the energetic youth on the straight and narrow. Snow removal, yes snow removal! We just got back from a visit to a quaint Midwest city which we loved but I asked myself who will remove the snow in the winter?
Which brings up the ultimate lifestyle consideration, the weather. Let us face it, for most of California anywhere we move is a weather downgrade. Yes, I know some of you may be headed for the beach in which case you are not relocating unless you must, and my heart bleeds for you but, for those relocating climate will be a major factor. You may already know what type of weather you will tolerate best for instance the dry arid desert of the southwest, or the humid summers of the southeast, or the icy cold of the north. Here most of us Californians laugh at out of staters who worry about our earthquakes. How do you feel about hurricanes, tornados, white out blizzards? We do have some of the most expensive weather in the country.
Speaking of expenses, this brings us to the financial considerations. Cost of living is demonstrably better in many parts of the country, but this category needs to encompass the big picture in your decision-making process. Gas is cheaper almost anywhere else in the lower forty-eight. However, so are most median income levels. So, it is very different for a retiree who already has their income sources in place to reduce cost of living expenses, compared to someone who is still working and pursuing a career.
That said we must consider median income across the country as well (source: University of Minnesota). Again, this is a state by state comparison. We all know there is a huge discrepancy between median household income of San Joaquin County compared to that of Marin County. Here in California that number is $70,001. Looking at a list of popular relocation states we have AZ at $62,311, TX at $59,703, ID at $58,729, Florida at $54,401 and TN at $55,601. Those numbers might not seem that far apart but California to Tennessee is about 22% drop. This requires planning and analysis before deciding.
Taxes many times are the reason we hear from people who decide to relocate out of California. We could dig deep getting into the weeds by comparing every type of tax head to head however, an easier measurement is provided by Wallet Hub (source) showing the overall tax burden by state which includes property tax, state income tax, along with sales and excise taxes. New York at 12.28% and Hawaii at 11.48% hold the highest two positions, while Delaware at 5.52% and Alaska at 5.16% hold the lowest two spots. The surprise is that California is in the 13th highest spot with 9.27%.
Again, highlighting some of the more popular areas we see people moving tells us that the tax burden is definitely a big factor people consider when relocating. For example, take the following list: Arizona ranked #31 at 8.25%, Texas ranked #32 at 8.20%, Idaho ranked #37 at 7.93%, Florida ranked #46 at 6.82%, and Tennessee ranked #48 at 6.18%. Note that the highest state income tax rate in this group is Idaho at 2.31% while most on this list have a 0% state income tax rate. Taxes matter.
We can not discuss financial aspects of relocating without looking at median home prices across the country (source: World Population Review). Keep in mind that there will be great variances in home prices within a state so to keep it on a high-level view we will just look at statewide median values. The highest are no surprise with Hawaii topping the charts at $587,700, followed by CA, MA, NJ, CO, WA, MD, NY, OR and Connecticut rounding off the top ten at $272,700. At the other end of the price spectrum we have Indiana tenth from the lowest at $156,543 followed by IA, KS, OH, KY, AL, OK, AR, MS and West Virginia the lowest of the 50 states at $107,927.
It really comes down to what you are looking for in the next chapter of your life. Do not decide something this impactful without doing your research. Educate yourself so you are making this decision from a position of knowledge not just emotion. Until we talk again, be well.

Registered Representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker-dealer and investment advisor. Member FINRA/SIPC. Dedicated Financial & Insurance Services and IFG are unaffiliated entities.