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Early Retirement Extreme Forums » Lifestyle Questions

1. 

   ere_novice
   

   Novice
   Joined: Jan '12
   Posts: 4

   I would like to tap into the collective knowledge of the ERE community to help me find the ideal retirement location. Everyone will have their own reasons for what kind of place they would like to retire, so I'll explain my criteria.

   First, I am 40 years old, married, 2 young kids (< 3 years old). I expect to have about 60K US/year in passive income (dividends) if I were to stop working in a year or two.

   I don't expect all of the following criteria to be met. Looking for a short list of places that meet as many as these goals as possible, so I can visit them over the next year or so.

   * Location in USA or Canada

   * Summers that are not too hot (i.e., avoid high humidity and temps > 90F), and winters that are not too cold (i.e., snow OK, but prefer sunshine and not bitterly cold)

   * No state income tax

   * Low property tax (<0.5% of home value)

   * Low utility costs

   * Able to buy new/updated one-story 2500-3000 square foot home for < 350K

   * Not too big (ideally 20K - 200K population) and not a lot of sprawl

   * Good place to raise a family (i.e., safe, things for kids to do, etc)

   * Neighborhood that is walking or short biking distance to good public elementary and middle school

   * Neighborhood that is walking or short biking distance to grocery store, pharmacy, and other amenities

   * Good public high school(s)

   * Good public universities in the state

   * Lots of parks, trails and green spaces

   * Proximity to running trails / routes

   I currently live in Austin, TX. Austin fails as a retirement location for me due to the high property taxes, and the super hot summers. I think pretty much anywhere in Texas would fail for those reasons.

   It seems like Colorado or Washington might be promising locations. In particular around the Vancouver WA area, and Longmont CO. Maybe some places in Utah or South Carolina?

   I know CO and UT have a state income tax, but at least it's flat and not super high. Ideally I want a state with no state income tax, but like I said before, I don't expect to get everything I want in one place.

   Posted 1 year ago #
2. 

   mikeBOS
   

   Master
   Joined: Nov '10
   Posts: 554

   You might like the weather in the high desert.

   The New Mexico lottery scholarship would allow your kids to go to college for free at any in-state public school (there's 25 to choose from) for 4 years as long as they keep up a 2.5 GPA. UNM's a good, solid public university. That can be huge if you're worried about saving for college.

   They do have an income tax, though the top bracket is only 4.9% and there's definitely plenty of outdoors enthusiasts to be found. Santa Fe has great schools and pretty temperate weather because of its elevation, and I think you could find a house to match your specs. Lots of skiing, hiking, restaurants, art, and theater for such a small city. Los Alamos might work too, it's much smaller but has great public schools and the highest concentration of PhD's in the country, so I'm sure you could find some interesting neighbors.

   Though, from your suggestions, maybe you're getting a little tired of desert life. I know I did ;-)

   Posted 1 year ago #
3. 

   KevinW
   

   Master
   Joined: Aug '10
   Posts: 577

   From http://usgovinfo.about.com/od/incometaxandtheirs/a/nostatetax.htm :

   Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. The states of New Hampshire and Tennessee tax their residents only on income earned through interest and dividends.

   I don't think any of those states meet your climate restrictions. Which one comes closest?

   There's some related information in the wiki: http://earlyretirementextreme.com/wiki/index.php?title=ERE_City

   Posted 1 year ago #
4. 

   mikeBOS
   

   Master
   Joined: Nov '10
   Posts: 554

   I wouldn't pick a state to live in based on avoiding a single digit income tax. Especially if you're going to be retired. Considering that you'd be living off retirement withdrawals and that you could hide lots of gains in tax-sheltered accounts until you're older, how much money are we really talking about per year?

   Posted 1 year ago #
5. 

   dragoncar
   

   Expert
   Joined: Oct '10
   Posts: 1,287

   May I recommend the gumdrop house on lollipop lane?

   I recommend California. With your stats, you'll be paying only 2.64% state income tax (paycheckcity.com). Compare this to 2.89% in Colorado.

   Posted 1 year ago #
6. 

   BennKar
   

   Journeyman
   Joined: Dec '10
   Posts: 144

   You want low income tax, low property tax, good schools, lots of parks, and fabulous weather. No problem, let me check my magic 8 ball. Sorry, it keeps showing "ask again later". Why don't you ask for everyone to be smarter and better looking than average as well.

   That's it! Lake Wobegon. Check it out.

   Ok, with that needed text out of the way, you're smart to look ahead and try to find something you like since you will not be tied down to an employer. I think you need to go over your list again and pare it down some to those you really want. Then you can make a more intelligent choice.

   Posted 1 year ago #
7. 

   ere_novice
   

   Novice
   Joined: Jan '12
   Posts: 4

   mikeBOS -- thanks for the NM info. I wasn't considering NM, but it sounds like it's worth looking into.

   That program for free college for in-state high school graduates is pretty amazing. I wonder if any other states offer something like that.

   A state income tax isn't a deal breaker for me, it's just something I want to minimize.

   Posted 1 year ago #
8. 

   ere_novice
   

   Novice
   Joined: Jan '12
   Posts: 4

   > May I recommend the gumdrop house on lollipop lane?

   You may, yes. :) Seriously though, my list of criteria is a "wish" list in a way. I know there is no place that will have everything. Just want to get as close as possible.

   Not sure what formula paycheckcity.com is using -- CO has a flat 4.63% state income tax. I have looked at a few places in CA, for example Temecula. One concern I have about CA is that the laws that keep property tax at 1% will eventually be killed, leading to much higher property taxes. Not sure how CA will solve it's budget problems otherwise.

   Posted 1 year ago #
9. 

   S
   

   Journeyman
   Joined: Jul '10
   Posts: 288

   @ere_novice Georgia has a similar program to NM for state colleges (GA Tech and UGA are both good). The climate is miserably hot and humid in the summer though unless you're in the mountains. Savannah could be a decent fit for your criteria otherwise. Charleston is similar if you'd prefer SC no income tax over GA free tuition. They're both smallish cities with historic downtowns that have stuff to do with the family and plenty of wild areas to explore along the coast if you enjoy the ocean. Neither is expensive if you don't live in the historic district. Here's a typical house in Savannah within walking distance of public schools, grocery, and some restaurants and a 15ish minute drive to the beach or downtown.

   Posted 1 year ago #
10. 

    BeyondtheWrap
    

    Journeyman
    Joined: Jul '10
    Posts: 266

    @ere_novice: With that much passive income, you can pretty much live anywhere.

    Reading your description, it sounded a lot like where MMM lives (Longmont CO), but I see you've already listed that as a possibility, so good for you!

    Posted 1 year ago #
11. 

    dragoncar
    

    Expert
    Joined: Oct '10
    Posts: 1,287

    I don't think a "flat" tax is ever really flat. There are deductions, right? 4 allowances (1 wife, 2 kids, and yourself). Plus you are (presumably) filing married. This must adjust some deductions or something. A truly flat tax of 4.63% * gross income (with no deductions or adjustments) would actually be quite high compared to most states for all but the highest earners.

    Posted 1 year ago #
12. 

    Marg
    

    Novice
    Joined: Oct '11
    Posts: 24

    I live in Washington state and while it is a good place to raise a family, we've been considering moving b/c of the property taxes and the high cost of living in our area. We have family here so we may not change, but we've been looking at some other western states. Oregon looked the most interesting to me.

    I'm pretty pissed off about the taxes, honestly. When property values tanked they did end up dropping for maybe a year and then they were back up where they were when housing values were high b/c (my take) the government got used to spending that much and wanted the same revenue so they just hiked taxes like mad. My taxes are just as high as they were at peak housing prices. There are no real checks in place for taxing people out of their homes. For senior citizens who make 35k a year or less, you can get a tax exemption but otherwise there is nothing. No limits. No protection. If you are low income, well, they will pay your taxes for you and put a lien on your house (with interest). How nice of them :/ We bought a big fancy house when my husband was working full time but he's left his job and earns a stipend as a grad student now. This coming year we expect to pay 40% of his income in property taxes O_O We have savings of course, but just the thought of paying 40+% of your income in state taxes (more than 40% when you add the 9.5% sales tax) is something I find offensive. There ought to be some checks in place.

    Also, they have some big expensive projects planned for the future. They are also going to replace one of the bridges across lake Washington which will cost 4.65 billion. To help pay for it they have implemented tolls on the bridge to raise 1 billion... and even with that they will still be 2 billion short. More tax increases to fund it? The current toll is 3.50 to cross (each way) during peak hours. People are dodging the tolls by using the other bridge and the person in charge of the project is now talking about tolling the other bridge but it is an interstate so they can only do it if the federal government lets them. I think the criteria is that they only do that if it is necessary to generate funds to do necessary repairs... but the repairs wouldn't be done to the interstate so the project leaders may not get their way.

    As you can probably tell, I'm not very happy with the way my state is doing things right now. It is beautiful up here and it is a very nice place to live in many ways. I just think the goverment here is used to having a lot of money (property values were growing very quickly for about 15 years) and they don't seem to think they need to tighten their budget just b/c the economy is slowed down. I don't think much of their money skills.

    There are a lot of great things about Washington and I think some areas (not king county which is $$) would meet most of your criteria. If you do move to Washington or to another state heavily dependent on property taxes, I would recommend living in the least expensive house you can comfortably live in.

    A note about the weather: the people who don't like it here typically complain of the gray drizzly days. The annual precipitation isn't all that high, but the rain happens very slowly, not in big downpours with blue skies in between storm systems. Our winters aren't that cold, but they are definitely gray and cloudy.

    Posted 1 year ago #
13. 

    George the original one
    

    Expert
    Joined: Jul '10
    Posts: 1,938

    > Our winters aren't that cold, but they are
    > definitely gray and cloudy.

    October through March for the Pacific Northwet. Some sunny days when a high pressure system sits over the area.

    Posted 1 year ago #
14. 

    KevinW
    

    Master
    Joined: Aug '10
    Posts: 577

    @Marg
    Where I live property taxes are based on the market value of the property, and there's an appeal process to contest the tax collector's appraisal if you think it's grossly inaccurate. Do you have an appeal process like that?

    Posted 1 year ago #
15. 

    LiquidSapphire
    

    Master
    Joined: Jul '11
    Posts: 434

    I worked for the Navy for a while and lived in and around Bremerton and Tacoma for a time, outlying suburbs of Seattle.

    The NW is beautiful! So much green, mountains, ocean, all within an hour or two's drive, if you're anywhere near Seattle. The main reason I couldn't stomach staying there is the CONSTANT gray from October to April. I was never a person that suffered from SAD but now, living in considerably sunnier CO, the difference is HUGE. It just gets you down, seeing all of that gray, all of the time. I really felt like for 7 months of the year, I didn't see the sun at all, just GRAY. I remember in college, all of the student would go CRAZY on sunny days, because they were so infrequent during the winter, you really appreciated the few you got. I also remember, many times, "summer" weather (warmer than 60) not starting until JULY... it wasn't for me.

    If you can tolerate that kind of weather, look into areas like Kingston, Poulsbo, Silverdale, Bremerton, Seabeck, Belfair, Port Orchard. 1 hour ferry ride to Seattle from the Bremerton port, less from the Bainbridge Island port, but property prices are considerably lower, and they are still beautiful.

    Vancouver is popular for retirees - shop in Oregon for no sales tax, live in WA for no income tax. I have never lived there though.

    Posted 1 year ago #
16. 

    JohnnyH
    

    Expert
    Joined: Jul '10
    Posts: 1,363

    Wyoming passes all those tests except cold winters... For which the solution is wood heat.

    Hoping to move there myself. :D I currently live in MT and there is an exodus to the more tax friendly neighboring states, that have jobs (WY, SD, ND).

    Washington would be good, but as has been stated, property taxes are a liability... But perhaps not in eastern WA.

    Posted 1 year ago #
17. 

    Marg
    

    Novice
    Joined: Oct '11
    Posts: 24

    @kevin there is an appeal process for the assessment of the market value of the house. It could be a bit off but the fundamental problem is that we could never buy this house on our current salary. The median price for a single family home is a little over 5 times the median income. I think they set up the tax rates with this in mind... the idea that your home value is an indicator of your income and of how much tax they can charge you for. Trouble is we bought and paid off a house that is more like 25-30 times our current income. Even if it is off a few percent, we're still going to have to pay a huge portion of our income in property taxes.

    A taxation model like this is based on the idea of a typical consumeristic family and doesn't work well for retiring early on modest investment income. Having property taxes instead of income taxes doesn't seem like a win for ERE.

    I guess it depends on your exact income situation etc. which state is best, but to me it seems more desirable to have the state depend on income taxes for most of the budget. I don't have a problem with paying some taxes to my state... just not 40%.

    Living in a less expensive house is another way to reduce property taxes, of course, so if you move to WA, do keep that in mind.

    It really is beautiful here and there are a lot of wonderful things about this area, it just seems to me that the high dependence on property taxes is bad for someone on a fixed income.

    Posted 1 year ago #
18. 

    Micawber's Brother
    

    Apprentice
    Joined: Jul '10
    Posts: 56

    @ere_novice I read your post this morning. We are approximately the same age and have the same family situation. I must say I was impressed by your passive income amount at such a young age. I am an extreme saver with a better than average income, but I can not come close to 60k in passive income by 42. I would be interested in hearing your story if you feel comfortable sharing it.

    Posted 1 year ago #
19. 

    ere_novice
    

    Novice
    Joined: Jan '12
    Posts: 4

    brian -- My story is one of hard work combined with good luck, and tainted by stock market downturns.

    I graduated in 1995 with a degree in computer engineering, from the University of Toronto. I graduated without debt, since I took advantage of a 16 month work program at my university (which means it took me 5 years to graduate instead of 4). I never owned a car in college, and never took on any credit card debt. I also paid my own way entirely.

    I went to work for a large telecommunications company in Ottawa Ontario, but after a year I was not happy there. I decided to do what I've always had an interest in -- video games. So I got a job in the US in the fall of 1996 as a video game programmer. My starting salary was $32K/year.

    I loved what I was doing so much, I put everything into my job. My salary skyrocketed, and the games I worked on were successful so I saw large bonuses. There were a some great years where my gross pay was over $200K.

    I saved, lived below my means, and invested heavily in the stock market. I was burned bad in the tech crash of 2000, then badly burned again in 2008. What has helped me is the fortitude to not sell when things look the worst. What was really horrible were large investments I made into Bank Of America and Citigroup while they were dropping (I thought those banks were "solid"... I was wrong).

    I made some good calls in the market, investing heavily into Altria in 2007, which I still hold to this day. It alone provides me with 20K/year in dividends. I know this is considered risky to be concentrated so much into one company, but I feel strongly that I will own MO/PM forever.

    I only invest in dividend-paying stocks that I perceive to be safe. I have about $1.2M invested, including 401K. Currently, my non-401K investments generate $36K/year.

    To reach the $60K/year, I will need to roll my 401K over to an IRA, and change it to dividend investing stocks that yield about 5.5%. This is not that hard, with the likes of T and MO. I will have to take the 10% early withdraw penalty for dividend income I extract from the IRA, but my tax bracket will be super low. I have looked into the SEPP withdraw "loophole", but I'm not sure it's worth the hassle.

    I married late, had kids late, and my overall feeling is that I've worked hard enough (and long enough) that time with my family and for myself is more important than more money and possessions.

    Posted 1 year ago #
20. 

    Freedom_2018
    

    Journeyman
    Joined: Dec '10
    Posts: 175

    For a more subjective but fun assessment try : http://www.findyourspot.com/

    @ere_novice : Nice job! I have Dividend Envy now :-)

    Posted 1 year ago #
21. 

    JasonR
    

    Master
    Joined: Feb '11
    Posts: 334

    I have gamer envy. Can you share any titles you worked on? Or employer(s)? Sometimes companies send me games and other silly swag for the sites/banners I build...it'd be crazy see if you worked on any of them.

    I wish I could chime in with the coordinates of this Shangri-La being described. We're planning on Shenandoah, although to be fair we always think we'll retire to the last place we hiked. Unfortunately the summers can be very humid, and it can get breezy up in the mountains. Not sure about the high schools either. There was also a startling lack of banjos.

    Posted 1 year ago #
22. 

    KevinW
    

    Master
    Joined: Aug '10
    Posts: 577

    @Marg
    Sounds like you're going to have to pick the lesser evil: move to a cheaper house in the same state, move to a similar house in a state with lower taxes, or invest a lot more to cover the taxes you've got now.

    Posted 1 year ago #
23. 

    Micawber's Brother
    

    Apprentice
    Joined: Jul '10
    Posts: 56

    @ ere-novice many thanks for your storey. I love ERE success stories b/c the not only inspire but also instruct. ERE success seems to fall into three investing categories real estate income, asset allocation strategy, and dividend growth. I am currently in the asset allocation strategy, but eventually I think I should probably experiment in all three areas. My original dividend growth efforts were okay to extremely bad – i.e. Pfizer and Bank of America. Your story will make me take a critical look at my assumptions. Thank you for sharing.

    Posted 1 year ago #
24. 

    Marg
    

    Novice
    Joined: Oct '11
    Posts: 24

    @kevin yup, that's about it. Suck it up or move on, I guess. DH is back in grad school now and we are planning to stay in this house until he's finished and have the money set aside for the taxes. Hopefully the market will be stronger then and we'll have more options. It's painful to write the check, but selling at a gargantuan loss would be even more painful.

    We've been talking about other places we could live, though, and looking closely at Wyoming. We like what we see so far. We found a nice little college town there and DH thinks he would enjoy teaching (even with FI - wants a lower stress position, though). Both property prices and property tax rates are lower in Wyoming and it seemed like a nice place in a other non-tax related ways. We're thinking about taking a driving/camping vacation in that area this summer (for other reasons as well) and maybe checking out the town we like. Could be fun :)

    Posted 1 year ago #
25. 

    KevinW
    

    Master
    Joined: Aug '10
    Posts: 577

    Yeah Wyoming seems good for ERE purposes. Pros: low taxes, low housing costs, and my impression is a non-materialistic local culture. Cons: harsh winter requires lots of heat fuel, car-free is probably only possible in a very few places, Country/Western vibe may be a turnoff for some people.

    Keep in mind that full time college faculty jobs are about as competitive as professional sports jobs. People obviously get them but it usually requires some flexibility. So I'd caution against a plan like "I'll drive to Laramie and just get hired to teach full time."

    Posted 1 year ago #
26. 

    Radamisto
    

    Novice
    Joined: Oct '11
    Posts: 15

    I'd suggest Malta. No taxes on foreign income as long as it stays abroad, no property taxes, very safe, good education system. Moved here a year ago from Ireland and just love it!

    Posted 1 year ago #
27. 

    chilly
    

    Journeyman
    Joined: Dec '10
    Posts: 275

    http://www.findyourspot.com/

    You'd think after all these year I'd be curmudgeonly enough to avoid sites like that - but I go suckered in and wasted 4 minutes of my life before realizing they'd require me to register for results.

    Posted 1 year ago #
28. 

    web_diva
    

    Novice
    Joined: Dec '11
    Posts: 28

    For the last few years Money Magazine rates Delaware as the 2nd cheapest place to retire, all things considered (income tax, property tax, sales tax, energy, overall cost of living). Alaska is predictably #1 due to its oil revenue profit sharing with its citizens but of course, it's probably colder than you want to go.

    Southern Delaware is especially rural and with its low height above sea level and close proximity to the ocean, the winters are relatively mild and the summers aren't terribly hot or humid. There are things to do in Wilmington, DE, the shore points including Ocean City, MD and the activities in Philadelphia, Baltimore, and DC aren't a terrible drive either.

    See this link for more details about which states tax what: http://retirementliving.com/RLtaxes.html

    Posted 1 year ago #

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