A common conversation among New England residents involves where to live after retirement. It’s an age-old trend that snowbirders and grandparents move out of Connecticut for down south. If they’re looking for warmer weather or a change in culture, they’ll get it.
If they’re leaving Connecticut to avoid taxes, though, the Wall Street Journal has a warning for them. While other states may lack the income tax and other charges Connecticut and New England have, there are often trade-offs that put them in similar – if not worse – financial positions.
One couple who left Indiana to move to Florida, the Journal said, found the idea of a tax-free paradise fell apart when the costs of buying a new home and covering insurance rose to their previous spending levels. They even had to unretire after Hurricane Helene required serious home repairs.
The issue at hand is complex and relies on far more than just tax brackets, as different households may receive income from different sources. Wealthier ones, relying more on investment returns, may find state income taxes important, but middle-income households may need to take a second look at sales and property taxes before they make a decision. For instance, while Tennessee lacks an income tax, it has a combined state and local sales tax of nearly 10%.
Insurance, especially in areas with extreme weather events, is another primary factor. The Wall Street Journal found that despite Californian taxes being more than twice Floridian taxes, the high cost of homeowners and car insurance actually caused Floridian home costs to be more expensive overall. Texas’s growing insurance costs left the state within a stone’s throw of California as well.
According to Marketwatch, car insurance costs can vary wildly across the country, with red states Louisiana and Florida coming in ahead of Washington, D.C. and Colorado for full-coverage rates. Bankrate added that Florida has one of the highest risk levels for home damage during storms, with its shape and geographical location making it a prime target for hurricanes.
The Wall Street Journal, speaking to a Bankrate analyst, found that rising costs of homes in some areas like Florida are likely to mitigate any tax savings. The Journal cited one story of a couple who retired from Michigan to Florida, only to find themselves spending $35,000 a year on homeowners insurance, property taxes and homeowners-association fees.
In fact, according to Seniorly, Florida is the 15th worst state to retire in for folks on a budget, with tax-friendliness canceled out by spikes in home value and rent costs.
The Wall Street Journal noted that the grass is not always greener on the other side, as one wealth planner talking to the publication found that there are little cost savings for people moving to low-tax states – unless they are already wealthy.
