15 Mar Should we leave N.J. for lower taxed state?

Q. I am 54 and will receive a pension of $66,000 a year. My wife is also 54. She will be eligible for two pensions worth $1,200 at age 65. We have saved $800,000 in retirement accounts. We own a home with a mortgage payment of $850 a month and pay property taxes of $13,000 a year. I would like to move out of New Jersey to a less taxing state while we are young enough to resettle. Am I too worried about our future in New Jersey?
— Doing the calculations

A. There are many factors to consider before relocating outside of New Jersey.

The three most common factors that are used to judge the rank of states are overall affordability, taxes and quality healthcare, said Roy Williams, president and founder of Prestige Wealth Management in Flemington and Millburn.

From a tax point of view, New Jersey has historically ranked poorly, Williams said. There have been recent improvements, but he said everyone’s situation and priorities should be evaluated.

“Under the current law, New Jersey exempts Social Security benefits from income taxation,” Williams said. “Thirteen states do tax Social Security income.”

Williams said New Jersey also has an additional retirement income exclusion for individuals who are 62 and over.

Those filing a joint return can exclude an additional $60,000 of retirement income in 2018 as long as their income is less than $100,000. By 2020, a couple filing jointly will be able to exclude up to $100,000 of retirement income on their New Jersey tax return, potentially reducing their state taxes to zero, Williams said.

The key is keeping under the $100,000 income limit, he said.

Currently New Jersey does not have an estate tax but it does have an inheritance tax, so be sure to check if whatever state you consider moving to has either of these taxes.

From a property tax perspective, New Jersey property taxes have been considered the highest in the nation, Williams said, and your bill of $13,000 a year isn’t uncommon here.

So if a couple has $100,000 in retirement income and $30,000 of Social Security benefits, 10 percent of your income will go to property taxes.

“While your property taxes are higher in New Jersey, many other costs are higher in other states,” he said. “Think of the homeowners insurance premiums you are going to pay in other states that are prone to hurricanes, floods, mudslides.”

Also, he said, if your family lives in New Jersey, you will either be paying to fly or travel to visit them or maybe pay for them to come visit you.

Health care should also be considered.

New Jersey has many great medical centers and hospitals and is close to New York or Philadelphia, something that can’t said about all other states that have a lower cost of living, Williams said.

“We often recommend to rent in the new community that you want to live in for at least a year to really get to know the area, your neighbors and if you really want to stay there long term before buying a new home,” he said.

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This post was first published in March 2018.