07 Jan Why everyone is leaving NJ – and why it impacts you

by Jerry Lynch, CFP, JFL Total Wealth Management

I was looking at my securities licenses about two months ago, questioning if I needed to be licensed in 22 states (licensing can be expensive). When I started, I was only licensed in New Jersey. I found out that the number of licenses that I needed was correct because everyone is moving out from this area to places that are less expensive to live (and a little warmer is also nice).

I was reading an article (CNN popular states to move) based upon a study that United Van Lines did on 123,000 moves and what it shows is New Jersey winning — as the state most people are moving out of. New Jersey came in first, followed by New York, and in fourth place we have Connecticut. The top three states that people are moving to are Oregon (yes Oregon), followed by South Carolina and Vermont.

There are several reasons why.

1) Property taxes: I live in a decent town and my next door neighbor who is 90 pays over $16,000 annually in property taxes. His home has moss on the roof, needs a lot of work and he refers to it as a tear-down. He just wants to die in that home because it is where he has lived for so long. If he just sold that home and pocketed money, he could move to South Carolina, live on a golf course and spend his money. With what he is paying in property taxes now, he could afford a mortgage and property taxes on a $250,000 brand new home. Especially if your kids have moved away, there is a pretty compelling reason to do so.

2) Cost of living: Everything in the New York, New Jersey and Connecticut area is substantially more expensive than almost every place else in the U.S. except California. If you are retiring and you are looking to cut expenses, lower home costs, lower property taxes and lower overall expenses, other parts of the country start to look very appealing.

3) Income taxes: New Jersey has a top rate of almost 9 percent, New York is about the same and the only state that is really higher is Caifornia at over 13 percent. This is on the top income tax rates and does not impact everyone, but it does give higher-income people a reason to consider other states. That combined with higher property taxes and sales taxes and you can pay a significant part of your income in taxes.

Why is this a problem?

• The people most likely to leave are retirees. Retirees have no kids in the school system and are generally “less expensive” residents who feel that they are overpaying for services that they do not need. If they leave, and the people remaining are the higher users of things like school services (young families), the cost goes up for everyone still left in the state.
• Retirees have money to spend. That is why they are retired. They spend money locally at restaurants, use services such as landscaping, plumbing, etc. They support the local economy. Young families generally have less money and try to do a lot of things themselves. When people leave New Jersey and retire in other states, they take their money with them, which really hurts their former local economy.
• Pension obligations. The three states that I mentioned have very substantial pension obligations. If people with money are leaving, who is left to pay these very large expenses that are highly unfunded?

I do not see this as a problem for people who have significant money because they have options. They can move. I see this being a huge problem for those with limited means because they do not have as much flexibility to move.

If the people with money leave these states because it is too expensive to live there, the costs to maintain services in these states will stay at a very similar level, but with fewer people to pay for them, so the costs (taxes) increase. As taxes increase, the properties become less attractive and cause the property values to decrease. The world is also becoming more digital where companies do not need to be based in these areas. If there is no good reason why a company needs to stay here, especially when corporations will be subject to higher income taxes, then why stay? This takes away more jobs and creates a death spiral.

We have conversations with many pre-retirees that focus on where they want to retire. Most say it depends on where their kids move to but as younger people move out of this area, there is less holding the retirees here.

You don’t want to stay on a sinking ship unless you are the captain… and you’re not!

Jerry Lynch is a certified financial planner with JFL Total Wealth Management. He may be reached at or (973) 439-1190.

This story was first posted in January 2016.

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