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Living a frugal lifestyle means maximizing the price of every dollar and restricting spending as much as possible. For some retirees, frugality is a necessity, as income is steady and life expectancy is unknown.
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However, if you’re a thrifty retiree, one undeniable step you can take to stretch your retirement budget without requiring more income: relocate. Here are five benefits of moving to retire when living a frugal lifestyle.
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The main reason many thrifty retirees move is the preference for reducing their overall living burden. Everything from the price of gas to utilities to fitness care to food can be very different from state to state, and even city to city, and can make a big difference in your monthly retirement budget.
Saving even $200 per month on those parts can lead to up to more than $2,000 in savings per year. If you’re making plans to rent a space or apartment after you retire, your savings can easily exceed $1,000 per month, depending on where you live and the length of your contract. If living with your family is an option, moving may simply prevent you from spending more quality time with them and reduce your consistent monthly contract to $0.
While you can’t reduce your federal income tax source by moving to another state, you may need to especially reduce your income tax source. Each state has its own tax system, and rates can vary greatly depending on where you live.
If you’re looking for the most productive value, move to one of the nine states that don’t have an income tax source. By 2024, those states are Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, according to the IRS.
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If none of those states appeal to you, there may still be a way to reduce your income tax source. California, for example, has a top tax rate of 13. 3%, it only applies to other people with seven-figure sources. However, that rate is much higher than the 2. 9% rate that applies to high-income earners in North Dakota, for example.
Even for more modest earners, large discrepancies exist among the states. If you’re filing jointly, for example, a $78,000 retirement income would face a 1.95% tax rate in North Dakota but a 6% rate in California, more than three times as much.
Property taxes can vary widely not only from state to state, but even from county to county. If you’re thinking about homeownership in retirement, moving to a cheap state can save you a lot of money, especially if you own an expensive home.
Average effective asset tax rates in Hawaii, for example, are 0. 32% according to the Tax Foundation, just one-seventh of the average effective rate of 2. 23% in New Jersey. On a $500,000 home, that’s a steady savings of about $10,000. with year.
However, it should be noted that annual asset tax increases are limited in some states until there is a replacement in the property. At this point, taxes can skyrocket.
For example, in California, the accrual of taxes on assets is limited to 2% per year. However, if you buy a home in California, the price of the home will be reassessed at existing levels for asset tax purposes. In most cases, this particular will increase the amount of taxes paid. This is anything if you’re moving to save on asset taxes.
According to Zillow, the price of the “average” house in America is roughly $346,000. However, as the oft-quoted saying goes, real estate is all about “location, location, location.” From state to state, and even within individual cities, home prices vary dramatically.
For example, in Fresno, in California’s Central Valley, the median home value is $365,377, just above the national average. But homes in Malibu, a celebrity-filled city on California’s Southern coast, charge an average of $3. 39 million.
The good news is that if you’ve lived in a high-priced community during your career, you can possibly put literally thousands of dollars in your pocket simply by promoting your home at a premium and moving to a more affordable one. community. In many cases, you may not even want to leave your state.
The more productive climate is a common explanation for why many retirees move. If you worked your entire career in Buffalo or Chicago, for example, two cities known for their harsh winters, the concept of living in the perpetual heat of Arizona or Florida might be appealing. But in addition to avoiding snow and freezing temperatures, switching to a warmer climate can also save you money.
Healthcare is one of the top expenses for retirees. Harsh winters can be tough on the body, particularly for older people, and can lead to more accidents from slips and falls. Moving to a state with a more hospitable climate also offers the opportunity to participate in outdoor activities like walking, jogging or biking year-round, all of which tend to keep people healthier.
Sunny environments can also be better for your mental health, as consistently gloomy weather may affect your mood. All of these factors can add up to an overall healthier life and correspondingly lower healthcare expenses.
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This article originally published on GOBankingRates. com: Five Benefits of Moving for Retirement When Living a Frugal Life