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Living a frugal lifestyle means maximizing the value of every dollar and limiting your expenses as much as possible. For some retirees, income is fixed and life expectancy is unknown, making frugality a must.
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But if you’re a frugal retiree, there’s one simple step you can take to increase your retirement budget without needing additional income. It’s moving. Here are his top five benefits of moving after retirement while living a frugal lifestyle.
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reduced cost of living
The main reason many frugal retirees move is to lower their overall cost of living. Everything from gas prices to utilities to health care to groceries can vary widely from state to state and even city to city, which can make a big difference in your monthly retirement budget.
Saving just $200 a month on these items can save you up to $2,000 or more a year. If you plan on renting a house or apartment in retirement, the savings can easily exceed $1,000 per month, depending on where you live and the size of your rental.If you have the option of living with your family, moving may allow you to spend more quality time with them and The monthly rent will be $0.
income tax reduction
Although you can’t lower your federal income tax by moving to another state, you may be able to significantly lower your state income tax. Each state has its own tax system, and tax rates can vary significantly depending on where you live.
If you’re looking for the most cost-effective option, move to one of the nine states that have no income tax at all. According to the IRS, the states eligible in 2024 are Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
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If none of these states come to mind, there may still be ways to lower your income taxes. For example, California’s top tax rate is 13.3%, but this only applies to those with seven-figure incomes. Still, that’s significantly higher than the 2.9% tax rate applied to high-income earners in North Dakota, for example.
Significant differences exist between states, even for more modest earners. For example, if you file jointly, $78,000 of retirement income is taxed at 1.95% in North Dakota, but more than triples to 6% in California.
Property tax reduction
Property taxes can vary widely not only by state but also by individual county. If you plan to own real estate in retirement, moving to a less expensive state can save you a lot of money, especially if you own an expensive home.
For example, Hawaii’s average effective property tax rate is 0.32%, just one-seventh of New Jersey’s average effective tax rate of 2.23%, according to the Tax Foundation. For a $500,000 home, you’ll save nearly $10,000 a year.
However, an important thing to note is that some states limit annual property tax increases until ownership changes. At that point, taxes can skyrocket.
For example, California limits property tax increases to 2% per year. However, if you purchase a home in California, the value of the home will be reassessed to current levels for property tax purposes. In most cases, this will significantly increase your tax bill. If you are moving to save on property taxes, you should take this into account.
lower house prices
According to Zillow, the “average” home price in America is approximately $346,000. But as the saying goes, real estate is all about location, location, location. Home prices vary widely from state to state and even within individual cities.
For example, the average home price in Fresno, California’s Central Valley is $365,377, slightly above the national average. But the average price of a home in Malibu, on the celebrity-filled Southern California coast, is a whopping $3.39 million.
The good news is that if you lived in an expensive area during your career, you may literally be able to pocket hundreds of thousands of dollars just by selling your expensive home and moving to a more affordable area. is. In many cases, you don’t even have to leave the state.
better weather
A common reason many retirees move is for better weather. For example, if you’ve worked all your life in Buffalo or Chicago, both of which have notoriously harsh winters, the idea of living in the eternal warmth of Arizona or Florida may be appealing. But in addition to avoiding snow and frigid temperatures, moving to a warmer climate may actually save you money, too.
Medical expenses are one of the largest expenses for retirees. Harsh winters can be especially hard on the elderly, which can lead to more accidents due to slips and falls. Moving to a state with a more pleasant climate also provides opportunities to participate in outdoor activities year-round, such as walking, jogging, and cycling, all of which tend to keep people healthy.
A sunny environment can also be good for your mental health, as constant gloomy weather can affect your mood. All these factors add up to an overall healthier life and a corresponding reduction in healthcare costs.
GOBankingRates Details
This article originally appeared on GOBankingRates.com: 5 Benefits of Moving in Retirement While Living a Frugal Lifestyle
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