One of the biggest decisions you may have to make in regards to your finances is whether to move to a new state. The location you choose could have a big positive impact on your future, and your bank account.
There are many reasons why you might consider a new location rather than staying put. You may save big money if you live in certain states with lower taxes and less regulations. You may be able to keep your current high paying job and work remotely in a lower cost of living environment. I have found that many people can lower their tax bill considerably if they move to a lower taxed state.
These lower taxed states may also have a lower cost of living because the price of groceries, fuel, healthcare, and housing are inexpensive compared to your current home state. If you are able to keep your current income level and lower your costs, this allows you to save more and improve your financial situation. But the financial benefits of moving to a new state don’t stop there.
Convert Some of Your Home Equity to Cash
One of the biggest financial reasons to move is to convert some of the equity in your current home into liquid investments. These investments can then provide future income or be a nest egg for emergencies. If you have much of your savings tied up in retirement accounts, you may be faced with a large tax bill in the future. Retirement accounts are taxed heavily if you need a lump sum for a big purchase or medical emergencies.
It is important to keep a high amount of money in liquid assets as you age because there are a lot of unknowns that require cash. Given that there is a tremendous amount of uncertainty in our economy, having liquid sources of assets is very important as well.
If you live in a house that’s worth more money than a newly purchased residence, you could sell your house and pocket the difference in an investment account that is liquid. You may have taxes to pay if you do this, depending on the rules in place at the time. You may also be able to make the transaction without taxes.
Provide More Flexibility and Improve Your Lifestyle
Having more liquidity can improve your situation dramatically during retirement. It will give you more flexibility in how you withdraw money out of your retirement accounts in later years. This can lower your tax bill over time because you have tax diversification. You can manage which account you take income from year-by-year as the tax laws change.
Another reason you may want to move is because you want to be closer to your relatives. You may find yourself much happier being closer to family and friends that are far from you now. Improved relationships lead to improved happiness.
Here are more factors to consider when moving to a new city.
If you live in a cold climate, moving to a warmer climate can improve your ability to be more active in your later years. This could lower your stress level, and may help you live a longer life because you are able to live a healthier, active lifestyle. If the new location you consider is full of activities that you enjoy, this is even more of a positive for you.
Tips on Deciding to Move
There are some thoughts that can hinder you from making that decision to move to a new state even though it makes a lot of sense. A fear of the unknown can overwhelm you if you focus your attention on fear-based self-talk. For example, you may continually ask yourself, “What if I don’t like the new location? I don’t want to have to make all new friends and change my routine. I don’t want the hassle of finding new people.” Fortunately, there are a couple of tips that may help you decide if you should make the move.
Assess how much money you have in liquid assets. If you have most of your money tied up in illiquid assets, you will gain more financial flexibility if you sell your home and invest the proceeds in stocks and bonds that are more accessible. This could lower your tax bill later on because if you need money down the road, you won’t be forced to withdraw money from highly taxed retirement accounts.
Compare the cost of living, taxes, and home prices to your current home state. Do you have a net gain or loss from the move financially? Take a vacation to the locations that you find interesting. Try to stay longer and envision what your lifestyle would be if you lived there. Where would you live, shop, or meet other people?
If you have been thinking about a move, go ahead and see if a move makes sense for you. Moving to a new location could be the best thing for your life.
For more advice on how to profit from your investments, you can find Financial Freedom Blueprint on Amazon.
About the author: Louis B. Llanes is the founder of Wealthnet Investments, LLC, a fiduciary registered investment advisory firm. Prior to founding Wealthnet, Louis held several investment management positions, including senior portfolio manager for the US Bank Private Client Reserve, quantitative trader for a private fund, and investment consultant for Kemper Securities. Louis holds the Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT) designations, an MBA from the University of Denver, and a BS in Finance from the University of Colorado. A contributing author of The Handbook of Risk, he wrote Financial Freedom Blueprint to help busy professionals enjoy the retirement they deserve as early as possible. For Louis’ book through Amazon, click here.