State's Rights / The Right States

What would you do now for $100k in 10 years?

Perhaps figure out a way to move your life to Washington, Texas, or Florida? Worth consideration.

Inspired, per usual, by the brilliance of another — this time it’s Joshua Sheats at Radical Personal Finance.

Podcast Episode 633 goes into a lot of detail on why you might make a pretty big financial move: changing your state of residence to save on state-level income tax.

I love this topic because it’s quite dramatic compared to what I generally discuss with clients, but the reality is that it should be less taboo and more up for discussion. Some numbers below will demonstrate why.

Assumptions:

  • $150k household income, increasing 2% per year

  • 5% state income tax in your current state

  • Save & invest 100% of the state income tax that you’re no longer paying

  • 6% growth rate.

Outcome:

  • You have $100k extra saved by year ten.

  • You have $250k extra saved by year 18.

  • The growth of your savings begins to outpace your would-be state income tax by year 14.

  • You have a million extra bucks by year 35. (For you 30-year-olds, that’s age 65. Not actually that far away.)

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Of course there are a million other considerations here, and states with no income tax find creative ways to earn tax revenue as well. Some big factors would be job markets, property taxes, benefits received (what’s a good public school worth?), travel costs for family or clients, yadda yadda.

Nevertheless, the point is that the upside is really big here.

What do you think? Is it worth a million bucks over 35 years to live in Texas instead of California?

Robinson Crawford