COVID-19 & High Taxes Are Pushing for a Mass Exit From Northern States
Many retirees are asking themselves: Would I rather be burned by a high-tax state or the red-hot flames of that Florida sun? For many, the choice is obvious. State residents of New Jersey, New York, and Illinois fled their homes in search of tax relief in places like Arizona and the sunshine state. What prompted this exodus? It’s possible that COVID-19 is accelerating people’s retirement dates.
Why Are People Leaving the Workforce?
Source: PEW Research Center
The number of retired baby boomers rose by 3.2 million over the past year. This generation is fighting many issues, including safety hazards associated with the disease and ageism. Exasperating the issue further was the severe rise in unemployment in the spring of 2020. There are now fewer jobs for baby boomers with waning skill sets. These conditions are making it extremely difficult for these folks to get back into the workforce.
This departure isn’t just a rich versus poor problem. Those retired boomers are actually more likely to have only attained a high school degree or less compared to working boomers who possess a bachelor’s degree or higher.
Source: PEW Research Center
Citing this research, it actually makes sense for those retiring to have less education. People without a bachelor’s degree are statistically less likely to have the skills needed to work in several different sectors of today’s economy. They’re also more likely to be a part of a union, working blue-collar jobs for over 30 years with the promise of an excellent retirement package.
While data backing this statement is lacking, there is the potential that people are leaving due to the increased acceptance of remote work and the mass emigration of finance bros running away to South Beach. There’s also another possibility factor: All of these newly-minted retirees are moving to Florida to work part-time as real estate agents and would only have to complete 63 hours of Pre-Licensing courses for the low, low price of $119 (but we wouldn’t know anything about that).
Florida Is the Land of the Retired
United Van Lines is a moving company that specializes in cross-country travel. The company does an excellent job of recording their moving data and recently reported the large discrepancy in the percentage of people moving out of New Jersey, New York, and Illinois versus those moving in. Of the people leaving, the vast majority reported “retirement” as the reason why they’re leaving for warmer lands.
Top Places People Are Leaving
- New Jersey
- New York
Top Places People Are Moving To
- South Carolina
Besides the cold, high-taxed states like the ones listed above hinder the retirement plans of many. For some, staying up north can delay their goal for retirement by years. However, while high taxes (and the cold, and remote work, and banking MD’s desire to work poolside at The Clevelander) are motivating these moves, the ultimate catalyst is COVID-19. It has clearly upended our lives in many ways and will have an unknown, lasting impact for years to come.
Warning for Retirees
While tax-havens like Florida feature no income tax and other warm-weather benefits, there are some other expenses that could nip you where it hurts: your bank account. Make sure to consider the following before packing your bags and saying goodbye to the 32-year-old man-child living in your basement:
State and City Taxes: Forget income taxes - there are other taxes that could cut a hole in your wallet. Before moving to somewhere like Miami or Nashville, make sure to consider any other taxes that might hinder your move.
Increased Real Estate Prices: With inventory and mortgage rates at historic lows, you’ll need to be cautious not to purchase an overpriced home. Housing bubbles do happen, and conditions like this further feed the “pop.”
Property Taxes: With increased home prices, higher tax assessments sometimes follow. If you’re venturing into a quickly growing area, make sure to do research into potential new tax levies from the local government. There’s also the consideration of your new state taxing your tax pensions and retirement funds, which you absolutely do not want.
Domicile: You must spend at least 183 days in your new state in order to be considered a resident. Auditors from your old state could investigate you, which involves privacy issues like going through your cell phone bills and even tracking pings to nearby cell phone towers. In these situations, documentation is key. Going above and beyond by documenting your location can help you stave off Governor Cuomo from taking what is rightfully yours.
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