I would stick with Plan F if I had it. I do believe in most states if you want to change plans it would require a new application and underwriting. You could potentially be turned down if you had health problems.
If the net difference was ~$100, I woudl too, but in the numbers I posted earlier, teh net delta after meeting the deductible in my state is ~$400 year. (Perhaps the CA Insurance Commissioner prefers plans with deductibles?). Add to the fact that Plan F is closed to new entrants, so F rates will continue to increase faster than G; therefore, remaining in F doesnât make economic sense. (Sure, switching back may not be possible, but F will always be more expensive than G, so no big loss IMO.)
Iâm doing our taxes & it turns out we got a nice boost this year thanks to a state tax cut for retirement income. Itâs being phased in over several years, but this year 25% of our income is untaxed (including our IRA-to-Roth rollover). Itâs not a huge amount, but itâs noticeable ⊠I had to do research to make sure that TurboTax was calculating our refund correctly.
2 Likes
Have any of you thought of moving to a lower tax jurisdiction? How much would you have to save to make that choice?
I had/have been thinking of buying a house in Florida and convincing ShawWife to be there enough to make it a tax home. That would save MA taxes, which are for the most part 5% and a meaningful estate tax (up to 16%). That would be potentially significant, especially when I am forced to take RMDs on top of my income (not planning to retire) and SS. My FA did an analysis before interest rates were higher that suggested that MA income tax forgone would finance the purchase of a decent house in Florida. Probably less good now.
We met with our accountant and realized that you can not do this except for real. We would really have to make Florida our primary residence. Massachusetts Department of Revenue does not take kindly to losing income tax to zero tax jurisdictions and will audit. We would need to build a painting studio next to our house or buy a bigger house so we would have a studio. Hard to do in the place where we were looking.
But, I recall reading about a Puerto Rico having a more significant break. If one makes Puerto Rico oneâs tax home, which seems even more stringent than Florida, and if one operates a service business that exports (e.g., a consulting firm), one pays 4% corporate tax and dividends to the owner are tax free. You would have to take a min salary but the rest could be tax-free dividends. (no federal tax). I could have saved a lot of money had I made Puerto Rico my residence 20 years ago. However, I canât tell if moving to Puerto Rico would reduce taxes on RMDs. It says no taxes on Puerto Rico - sourced income. If I moved my 401k to a Puerto Rican bank, would that meet that requirement. Who knows?
I wonder how much I would have to save to make me strongly consider making someplace my tax home unless I wanted to live there anyway. I would like to spend the winter someplace warmer. Florida works. Not so sure if Puerto Rico would.
But
Lower taxes hasnât entered our planning. We can afford to live where we live, and we like it here.
3 Likes
Only half of my pension is taxed where we live now. Plus, we do not want a second home. For cold weather, we can always take a vacation south which is far less costly than owning another homeâŠeven with a tax break.
And we can go to different warm weather places every yearâŠnot stuck going to one place because we have a house there.
1 Like
The plan is to stick around our rainy town and to never have more than $250k of LTCG in a year. Lol like that latter would ever happen. No state income tax, just that pesky âexcise tax.â
1 Like
I have discussed with DH about moving to FL and we can save a lot of taxes by doing so. Heâs adamant about being in CA as his social network is here. He is busy meeting with different friends (former colleagues, running group, hiking group, book clubs) all week so staying put is important to him. In the meantime, I canât sell much of my stock holdings as it will trigger a lot of state taxes and CA treats capital gains as ordinary income. In addition, California does thorough audits on people switching residencies, including checking your cc receipts, cell phone records, bank records etc to make sure you are not physically in CA.
I have no expertise in any of these matters but have a story âŠ
My neighbors had houses in FL and NJ, and spent 183 days in FL in order for NJ to accept FL as their state of residence. One year they realized late in the year that they miscounted and had to rush to FL to make sure they werenât over (Maybe it was Leap Year?) I wonder with your travel schedule how MA would assess days not spent in either state. I assume youâd have to be registered to vote in FL if you choose vote.
The neighbors have since moved back to NJ as they werenât happy in FL. As the husband declined in health they felt they were not able to get the care they wanted for him.
We purchased a property in Florida with intention to make it our primary residence for tax purposes closer to retirement age (6-7 years to go) although PA taxes arenât as onerous as MA but it does have an inheritance tax (4.5% for children). H and some colleagues are discussing opening an office in FL as a few are considering the same retirement plan.
We have friends who own a home in Vermont and had an unexpected opportunity to purchase a home in Florida from a family member at a good price. Theyâve made Florida their residence for tax purposes (VT income tax is @9-10%) . Property owned, Florida DL, car and voter registration, spend the 183 days a year there.
The crux is can you work from both places if you donât intend to retire.
I live in a no income tax state and will keep it as home base in retirement for that reason.
Another Medicare question for former fed employees: our current fed medical coverage has the prescription plan as part of the overall plan. Does the pharmacy plan continue under the plan if you keep your fed coverage in retirement? Or do I need to pick up Plan D? I donât want to get caught short by not signing up for Part D, because my meds are expensive and I have one that goes through the specialty pharmacy (itâs thousands per month).
You cannot do that in CA. In order to change your domicile,you have to move to that residence and intend to remain there permanently and indefinitely. You would have to sell your house because holding on defeats the purpose of having a new domicile. When the taxpayer has two dwellings, and there are factors both for and against residency, then the state will presume that the first one is the established domicile.
Plus CA taxes CA income of non-residents (BTDT - my husband worked in CA even though he commuted and stayed in short-term rentals). CA being a community property state makes this even more complicated.
We have FEP BC/BS and it includes prescriptions. It is our secondary insurance. We all have part A and B medicare.
Retired here. Last year we were given a 2 week notice (BC/BS suddenly sent a letter) how we qualified for medicare Part D. I already knew that. The rates were supposedly better than BC/BS for certain meds and if you are on a lot of meds and expensive ones. I was automatically signed up unless I opted out. Both I and my H had to call and opt out. In tiny print it said there was no extra charge for most people. However part D is income based like the medicare part B is. BC/BS for us was considered creditable coverage.
I have no idea if I have to opt out yearly- they did not know. It would have cost us about $400 more a month.
If I sound irritated- I am. This came out of no where and in a letter I almost threw away until a friend from work called me to discuss it.
1 Like
Yep, same here except missed the letter because H was in hospital and I couldnt figure out if the benefit was worth it. Looked a little and saw the question of if would cost more for people that are hit with IRMAA and then also doesnât cover you out of country. Last part wouldnât affect H. Heâs not going anywhere. One medicine heâs on went from 0 to $60 a month but had been told it might cost $800 if not approved for use as liver drug. All this happening in December so just did not have bandwidth to figure it out and H is having cognitive issues. Iâll be interested in seeing what my choices will be in the fall when I turn 65
2 Likes
So I moved from a no-income-tax state to Massachusetts , where there are personal income taxes. I like to pay taxes, because it helps support the services that make this place so much better than Texas. I donât understand those of you who are truly well off, who know you will be able to leave a million dollars or more to your kids, who try to game the system by âmovingâ to some place like Florida, to avoid paying your fair share of taxes.
It really bothers me that the wealthy manage to shield their money, when they have plenty live on while also paying their taxes.
16 Likes
I can answer this, I think.
The fed plan keeps the pharmacy plan, but since it is credible Part D coverage, you would have to pay any Part D IRMAA. But for clarity, you should check with the individual federal plan and how it interfaces with Medicare.
2 Likes
CA definitely wants to hold onto their tax base.
East coast - laws may not be as stringent, as it has been a long tradition of people having two residences with âsnow birdsâ to FL â however, after retiring, changing to having their primary residence in a state like FL. Sometimes downsizing on their northern property. A friend of our family in WI pulled up completely at retirement to settle in southern TX; many do go to AZ during WI/MN/IA winter months. I see a lot of retirees moving to our area as their sole residence because one of their children with grandkids are here, and they see the amenities they like here.
Homeownerâs insurance rates have definitely gone up, in part due to so many catastrophic claims with weather. Some of the insurance rate is due to increase of property value, but our residential coverage cost went up 43% from last year (some increase in value). Noticeable.
Some people may consider how to only have as much property as one reasonably wants to use, or decide that is something they like and want to keep - their âluxuryâ spending.
We live where we want to live as retirees - be it currently staying for DHâs hobbies, for our continuing medical care, and for a current family reason. I told DH at the point he no longer wants to take care of our yard (we are on 1/2 acre, but some is wooded and not too big to care for until it becomes too much to care for) then it is serious for us moving. I want to be nearer to grandkids if they are permanently settled where they are - and be involved with the childrenâs activities which mom and dad cannot always do. Due to SILâs 4 weeks away for training, I will be the 2nd adult in the household during that time - I got the airline credit card which has the best service to getting there from our location and have the ticket purchased.
1 Like
My husband had to travel a lot to CA in his last years of employment, because the plant there could not obtain a qualified engineer to do the job. Fortunately his pay was always through the facility near our home. One to two weeks in CA, and one to two weeks back home. It kept him employed, and we have a lot of hotel points.