Making the right financial move
- By Milt x_Zall
- Aug 04, 2000
Getting ready to move? Or thinking about it? Roughly one in seven Americans
moves every year, according to the U.S. Census Bureau. Some of the moves
are merely across town, but about one in three are to another county or
state. Whatever move you're planning, it will have financial consequences.
Here's a checklist to help you manage the financial impact.
Before saying yes to a new job or new position with Uncle Sam, or before
simply pulling up stakes and heading off somewhere you think you want to
go, examine the financial consequences of the move.
Is the cost of living where you moving to higher or lower than where
you live now? Home prices are especially critical, as well as transportation
and food. The pay from a new job may compensate for any extra cost of living,
but if you're a retiree living on your Civil Service annuity, higher costs
may be prohibitive. One way to check out local expenses, besides contacting
the local chamber of commerce, is go online and plug "relocation" into a
search engine. You'll come up with numerous sites that compare living costs
around the country.
Taxes are another issue. Does the state you're moving to have a higher
or lower income tax? New York and California have high state income taxes,
while Wyoming and Texas have no state income tax. Income, sales, property
and other local taxes are another factor. Some states and counties tax intangible
property such as stocks, bonds and other securities — something to consider
if you have an extensive portfolio. Gift and estate taxes raise consideration
if you plan to gift a lot or have a large taxable estate.
It's common for both spouses to work. If you move because one of you
has a new job, the other spouse will probably need to seek new employment.
What are the job opportunities in the new community?
Do you sell, rent out, or keep your old home? This decision will depend
on several factors, not the least of which is whether you'll need the money
from the sale of the old home to put toward a new one. How hot or cold the
respective local housing markets are also is a factor. Could you buy back
into the area if you decide to return?
Should you decide to keep the old homestead, be clear where you want
to establish permanent residence — known as establishing domicile — if you
move to another state. Say you move to a state with lower estate taxes than
where you live now but maintain your old home. At your death, the old state
may be the one to tax your estate, not the new one, if you don't properly
establish permanent residence in the new state. Or you could end up being
taxed in both states. Registering to vote, getting a driver's license and
registering your vehicles, paying taxes and spending most of your time in
the new state should help clarify the issue. Review the residency and "substantial
presence" laws with an attorney.
Also have a local attorney check out your wills, powers of attorney,
living wills and other estate planning documents to be sure they comply
with the laws of your new state. New estate planning strategies, such as
trusts, may be in order if you end up owning property in more than one state.
Review your insurance policies. The new location may have less or more
expensive car insurance. Take the opportunity to shop around for a new insurer.
See if your homeowner's policy will cover your possessions in transit, and
if it does, see if its coverage and cost is better or worse than the mover's
New health insurance is necessary if you're moving to the private sector.
You may or may not have a waiting period for pre-existing conditions. If
you're not fully covered immediately under the new employer's policy, don't
risk "going naked." Either buy a short-term medical policy until your employer's
coverage kicks in or extend your government health insurance coverage.
Finally, don't cash out your Thrift Savings Plan. So often when people
move and change jobs, they cash out their retirement plan, using the money
to help move, buy a new car or put into a home. Even if you're young and
it's a small amount, that money could have compounded substantially over
Many thanks to the Financial Planning Association and Dennis Filangeri,
a certified financial planner based in Metairie, La., for many of the ideas
in this column.
—Zall, Bureaucratus columnist and a retired federal employee, is a freelance
writer based in Silver Spring, Md. He specializes in taxes, investing, business
and government workplace issues. He is a certified internal auditor and
a registered investment adviser. He can be reached at [email protected]