Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.
Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [00:26.1]
Brad: Welcome to Make your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett, and it's my goal to help you distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve. Friends, today the challenge is no longer the access to information, but rather it's finding the right information, and more importantly, how that information applies to you. And that's my commitment to you here today on the Make your Money Matter podcast, because after all your money matters and knowing how to plan your financial future is vital to your financial success. [01:13.2]
Before we get started on this week's episode, do you want to find out more about myself or any one of our advisors here at One Capital Management, you can go to our website at onecapitalmanagement.com and there you can actually schedule some time to meet with myself or any one of our advisors here at One Capital Management to do a complimentary retirement track review. Take a look at where you are in your overall retirement. And by the way, as you've heard me on this show, talk about retirement isn't necessarily meaning you have to be in your fifties or sixties. Retirement can also be being financially free. So, if you have questions about your investment portfolio or questions about getting started in investing and planning, reach out to us, go to onecapitalmanagement.com. You can schedule some time right there on the website, or give us a call (805) 409-8150. And if you're on the website at onecapitalmanagement.com, you can actually also click on the media tab and there you can download and subscribe the, make your money matter podcast and leave us a comment, give us a review, let us know how we're doing. It's always good to get feedback. And if you like the show, share it with someone you like. And if you don't like the show, I guess share with someone you don't like. [02:22.0]
But today we're gonna be talking about an interesting topic that has come up really in this past 12 to 18 months regarding a move out of California. Now here at One Capital Management, our headquarters is here in Westlake village, California. Many of our clients are in California, but as you know, we have many clients across the country. We have an office in the Kansas City area, up in San Francisco and in Newport beach and in Santa Barbara and different areas in California, but also in the Midwest. And we serve a lot of clients all over. So as experienced as advisors, we actually know quite a bit about some of the differences of cost of living, even down to the taxes and how certain states tax our clients outside of California. So, one of the things that have come up and we've seen the news is a lot of people are potentially moving out of California, whether to be closer to family that were back east or in the Midwest and they moved out to California now that they can work remotely or they just want to get out of California. It's a little bit more of expensive state, one of the more expensive states in the union, other than maybe New York and maybe Hawaii. [03:27.3]
So, it's interesting for us to have this conversation. I thought it'd be a good idea to go through how all 50 states tax retirees or individuals that have moved to those states. Now, obviously I'm not going to cover all 50. So, I'm going to select nine. Brad, why nine, you might ask? Well, the night I'm going to talk about are ones that are talked about quite frequently for different reasons, but one common denominator is that these nine do not have any state income tax. So, it's pretty interesting for most of us in California who pay high taxes, basically everywhere where there's sales tax, luxury tax, state tax, I mean just literally everywhere. So, it is what it is, but it's interesting cause we look over the fence and kind of go, oh man, Nevada, as an example, no state tax, four hours away. Hmm. Interesting. So, of all the 50 states, we can talk about the nine that I'm going to focus on happened to have no state tax. Now that's just one singular data point. So, for these nine, for the next few minutes, I'm going to go through a couple other things to consider at least financially or numerically other than just no state income tax. [04:39.3]
And the nine, we're going to talk about and yep, I'm a nerd. So, I went and did this an alphabetical order. I know, but hear me out, starting with Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Those are the nine states that don't have a city income tax. So, let's dissect this a little bit. Now I think it's important as an advisor, who's been doing this almost 20 years and we've done a lot of, and I've talked to my colleagues as well around different planning we've done around moves for our clients and outside of the numerical points that we mentioned, like no state income tax, but also taking a look at other taxes, property taxes, things like that there in the states. It's important to note, there's also a very large qualitative aspect that I want to make sure everyone listening knows about when considering or thinking about a move and that is this. It won't show up on paper. It won't show up as a rate of return or a reduction in taxes like we're going to be talking about, but it's important. And that's a community. Whether it's family members, friends, relatives, a church organization, something that you have a tie into in a community when you're looking to move somewhere is really important to the decision itself. And I think for the overall lifestyle and the sustainability of that move. [06:02.0]
I've seen a lot of clients really only focus and get really myopic when it comes to, I just want to move to a certain state because they don't want us to pay state income tax anymore. Yet when they go there, they spend most of their savings on that state income tax, traveling back to California or back to their state to go see friends and family and relatives. So just keep that in your mind, as we're talking about some of these, and I just want to make sure of the nine we're going to talk about there's a couple of other factors to consider when it comes to, again, moving outside of specifically California, or maybe any state for that matter. But if we're looking at a state that's a no state income tax, some things to consider. [06:38.4]
All right, let's start with the last frontier state, Alaska. Okay. First and foremost, no state income tax like we mentioned, but that doesn't mean the last frontier is the best state to retire to. It isn't necessarily a tax Haven, I would say. There are high property taxes, which has a lot to do with a mixed tax structure for many people. Their combined state and local sales tax is also about 1.76, the medium property tax rate as I mentioned, being a little bit higher is about 1001 82 per 100,000 of assessed home value. So right around 1.8, 1.2% property value, so not low. There is however, one unique perk if you live in Alaska, the state sends all permanent residents who have lived there for at least one year, an annual dividend check from its oil, wealth savings account. Pretty interesting. Imagine that for us here in California, a state actually paying us. Anyways, I digress, but the 2020 payout was $992, which goes a long way I think in balancing out any bad tax news, so, something to consider. [07:47.9]
All right, next up is Florida. Heard a lot about Florida and honestly, until a pandemic, we always knew and I think most people would know Florida as the sunshine state, but the quintessential retirement state. It is a tax friendly state. It does have no state income tax as we mentioned. The average combined state and local sales tax is 7%. Now real quickly compare that to Alaska at 1.76, quite a lot higher. Now for us here in California, pretty relative to where we're at the medium property tax rate, there is about $830 per a hundred thousand. So, it's a little under 1%, which is also good and there's no estate tax or inheritance tax. So, property taxes are reasonable in Florida and anyone ages 65 and older who meet certain income and property value in length of ownership restrictions can also receive an extra homestead exemption. So, Florida, no state income tax, but relatively high sales tax rate. And for many of us on the west coast, it's on the east coast. So, a lot of times I've seen it, you really want to have that community, those friends, because you're a distance away. I mean, you're, you know, six-hour flight, three-hour time zone difference for many of our, our family and friends here, maybe in the west coast or in the California area. So, something to consider when you look at Florida. [09:04.2]
All right next up is Nevada. Now just like the other nine, we're going to go through, as I mentioned, no state income tax. This one's interesting because it's very close to us here in California so, a lot of conversations arise around Nevada. It's mostly tax friendly. Again, no state income tax range. The average combined state and local sales tax rate is 8.23% relatively high, but the property tax rate is about half percent. So pretty good when the silver state offers retirees kind of a jackpot for savings, but for anyone else too. Again, property tax are considerably low below the national average and bad fact and that's good as the state offers no property tax breaks for seniors. So, Nevada being close in proximity, no state income tax, very low property rate tax. Pretty good to take a look at. So again, back to family, friends, community really important to kind of look at when you look at Nevada being a close bordering state to us here in California. [09:59.8]
Next up is New Hampshire live free or die. Residents of the granite state, they pay no taxes on social security benefits, pensions, or distributions from the retirement plans, because again, no general income tax, just like the others we've mentioned. However, New Hampshire is interesting because it imposes a 5% tax on dividends and interests. In fact, the first 2,400 or 4,800 for joint filers is exempt, but there's also a $1,200 personal exemption available for residents 65 and older. There is no sales tax in New Hampshire. That's a unique one compared to what it is. There's no sales tax in New Hampshire either. So, you can shop to your heart's content without having to pay any tax and you'd likely run into a lot of out-of-state shoppers. In fact, I have a lot of clients in the Massachusetts new England area. They actually shop in New Hampshire for different reasons. Now here's the hitch. The median property tax rate in New Hampshire is the fourth highest in the entire United States. It's around 2%. So that's even high for us here in California. So, some property tax relief is available for seniors, but the program really run by towns and cities that they're complex and not overly generous. So, if you're looking to move into the live free or die state, little New England area, something to consider, yes, it's no state income tax. Yes, it doesn't have sales tax, but property taxes are huge. Something to consider. [11:22.0]
All right next is South Dakota, the Mount Rushmore state. Mount Rushmore state, it offers both good tax news and bad tax news I would say. First, the good news as we've been talking about no state income tax. So again, social security benefits or other forms of retirement income, or really any income is not taxed there from a state level. The bad news though, if you take a look at the state's property tax rates, they're on the high side, they're not as high as New Hampshire, but they're right around 1.2, 1.3%, which is relative to what we pay here in California. So, it's kind of split on South Dakota, but another one that's a no state income tax and something to go through as we talk about it. [12:03.4]
Tennessee's our next east coast state. And I only say east coast due to the time zone. But oddly enough, in nearly 20 years of being an adviser most recently in the past year, I've had three different clients move to Tennessee, which I think is interesting because most of the clients I've ever talked to around moving are Nevada, Arizona, Idaho, some places here on the west coast, Washington, maybe some Oregon, things like that. But this one's interesting and I kind of get it. I mean, from a volunteer state, it's beautiful number one. Again, no state income tax and it's mostly tax friendly. There are some downsides though. The combined state and local sales tax rate is right around nine and a half percent, that's pretty rich. But the property taxes are low. The property taxes are about half of what we have here in California. They're about 0.6, almost half percent or so for property tax value. So, it's interesting when you look at that from a sales tax perspective, but I think most people are going there for what the state offers in terms of its lifestyle. Again, it's also a no state income state tax, but again, property taxes are low, but sales tax a little bit high. [13:12.9]
All right, Texas, Texas. How does a state with no income tax at all end up on a lot of lists that I look up as the least tax friendly? You wouldn't think that cause everyone talks about all Texas, Texas, Texas, no state income tax, things like that. Now remember, I'm just talking numerically and financially or not quality of life and things like that. Well, I think, and I was reading through this and I found a Kiplinger article around this cause it showed up as the least one of the least tax friendly states. And it starts by having the seventh highest median property tax rate in the country. The lone star state, Texas offers and again, for seniors in particular, it does offer some breaks from that property tax burden with an additional homestead exemption like Florida, there's valuation, freeze programs and different things like that. But the benefits there may not be enough to make Texas a truly tax friendly state specifically for retirees. And not only the property tax rates, a little high, the sales tax rate is pretty high as well. The average combined state and local tax in Texas it's 8.19%, which is the 14th highest combined rate in the U.S. This is one of the examples I bring up when it comes to moving out of California, moving out of state as a no state income tax. It's a great example of it's been marketed for a long time, being a great state for no taxes and financial reasons, right. And again, just financially numerically speaking, not quality of life and lifestyle and what everything else. But essentially when you look at it, 14th, highest sales tax rate, fourth highest property tax rate. It's interesting. So, you got to of look at where you're spending your money and where you're spending your time when it comes to Texas. [14:55.3]
All right, Washington, this one's also mixed because again, the evergreen state, it's one of seven states with no broad-based personal income tax. So, for many people, like I said, there was no worry about state taxes like we mentioned. However, it's interesting to note that beginning in 2022, Washington will impose a 7% tax on the sale or exchange of certain long-term capital assets if the profits exceed $250,000 annually. However, the constitutionality of the Washington capital gains tax is being challenged in court, but interesting to note. Now sales taxes in Washington are extremely high 9.29%. That's the fourth highest in the nation. Property taxes in Washington are a little more reasonable. They're a rider just under 1% or so and it's very close to the national average for that matter. And it offers actually two property tax relief program that's only for seniors. So again, age also comes into play when it comes to states and where you're moving and just solely focusing on no state income tax without looking at the other types of taxes and the other things around the financial move. [16:07.7]
All right, last but not least and this is definitely on the list that people at least here in California, they're not solely focused on moving here for state income tax reasons, but the equality state Wyoming, it's a very tax friendly state to all residents. I mean, of all the numbers I mentioned on the previous eight, no state income tax states, this actually is one of the most tax friendly. Again, no state income tax rate, the combined state and local sales tax rate is 5.3, very low. The median property tax rate is right around half percent. So, when you add these things up, you start looking at again, the sales tax being the eighth lowest average combined in the U.S and the low property taxes, which is tied for 10th lowest in the U.S and not to mention it's wide open over there. Now, again, family and friends and community is involved with any kind of move, but Wyoming, although it's not talked about too much is ninth on the list at least alphabetically of the states that have no state income tax, but all of the other two main ones that I focused on for this show around sales tax and property tax rate is also relatively low. [17:18.8]
Now that was the list of the nine, no state income tax states. Now I'm going to use California as a benchmark only because we are headquartered here, but if you're listening to this podcast and you're in other states, it just gives you a good reference point for another state that is not a no state income tax rate. So again, of all the taxes I was looking at for California, it can be a difficult state to figure out as many of us Californians know. First of all, the state income tax and for the most people it's in the 8, 9, 10% range, but it depends. Really how it looks is 1% up to 18,650 of taxable income for joint filers and 9,325 for individually all the up to 13.3% on more than 1.25 million for married filing joint letters and a million dollars for those filing individually. So somewhere in that realm is a pretty high state tax rate for many people living in California. The combined state and local sales tax rate is around 8.82%. So, you can see it's relatively high versus the other ones we were bringing up. [18:25.5]
Now, the median property tax rate is just under 1%. Now this varies by county, as we all know, but the median is around $729 per a hundred thousand of assessed home value. Kind of interesting if you think about it, given some other property tax rates that are significantly higher. So, it's interesting when you look at California as a barometer, if you will, compared to the other nine, and for many of us listening here who are in California, the move out of California for financial reasons, if we're working remotely, it's interesting to take a look at those nine. I hope today was at least a good eye-opener in terms of what other things to consider from a numerical standpoint, when looking at the nine states in the U.S that are no state income tax, because everyone likes to focus on that specific tax rate. But again, sales taxes, property taxes, estate tax, or inheritance tax, there's a lot of other things to consider when it comes to the financial data around a no state income tax state. [19:23.1]
Now there's also the cost of living. The cost of living is less in most states other than say the state of California. So, when you look at those kinds of things, you add it all up, the one thing that I mentioned a few times today, and it won't show up on paper, there's no numerical data that can show you this, but there is also a lifestyle that comes with wherever you move. And so, if you are considering moving out of California where you've worked and lived, I'm hoping it's close to family, friends, community, because financially speaking, it may be one thing, but you also want to tie that in with a good community around you. And the lifestyle we have here in California is great. There are some things that everyone has issues with. There's going to be issues in every state for that matter. But if you're looking at those kinds of things and going through it, I at least wanted to make sure you had some data points to go off of. If you have any questions on those or how it relates to your planning or the consideration of, you know, I'm working from home now do I stay here? Do I move? What's the right move for me, at least from my financial perspective, give us a call. You can call us at (805) 409-8150 or go on our website at onecapitalmanagement.com. You can set some time with myself or any one of our advisors to go through your planning to make sure it's right for what your goals and objectives are. [20:37.3]
I want to thank you for listening to the, make your money matter podcast with Brad Barrett. Again, if you haven't already done so you can go to onecapitalmanagement.com. You can click on the media tab and there you can download and subscribe the podcast. You can also download the podcast on anywhere you would otherwise download a podcast, whether it's iTunes, Google podcasts, Spotify, or SoundCloud. And remember before acting upon anything discussed today, speak with a financial advisor near you. And if you're not sure where to turn, and you'd like our help again, visit us at onecapitalmanagement.com for a complimentary retirement track review meeting, or give us a call (805) 409-8150. And until next week always make your money matter. [21:21.0]
The information in this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.
To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [21:43.8]
