What to Know Before Making a Post-Retirement Move

by Marc Bastow | June 28, 2013 11:30 am

What to Know Before Making a Post-Retirement Move

As a resident of Maryland, my financial adviser and accountant has some retirement advice for me:

Move to Virginia.

My adviser says I should make the move because Virginia has a better estate tax environment[1] for retirees. Without going into why that move’s not going to happen, his recommendation is something those getting close to retirement (and those already there) get all the time from advisers, as well as friends, relatives and of course advertisers.

But here’s one point that most of them fail to mention while they ply me with the tax specifics of every state[2]: If you don’t know the rules involved in changing your residence and taxing jurisdiction, you could end up owing a whole lotta money.

Not only is the IRS interested in your residence for tax purposes, but states are just as hungry to claw back money. With technology providing reams of cross-checking data to both the federal and state governments, even the slightest hiccups in your move can trigger questions and requests for documentation to prove your move was sincere, at least as far as residency regulations are concerned.

That means even simply trying to duck into a warmer climate must be done with a lot of forethought. Here are some tips, courtesy of Jeanne Sahadi[3], to get you started:

If you’re going to spend enough time in another state to qualify for its tax benefits, live the life there you would anywhere else: Don’t change your lifestyle, change its location. But here are the two best pieces of additional advice I can offer:

As for me, I’ll probably be in Delaware before I ever move to Virginia.

Marc Bastow is an Assistant Editor at InvestorPlace.com.

Endnotes:
  1. estate tax environment: http://investorplace.com/2013/03/5-great-places-to-die-for-tax-purposes/
  2. tax specifics of every state: http://www.kiplinger.com/tool/retirement/T055-S001-state-by-state-guide-to-taxes-on-retirees/index.php?map=1#anchor
  3. courtesy of Jeanne Sahadi: http://money.cnn.com/2013/06/18/pf/taxes/state-tax/index.html?iid=HP_Highlight

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