My spouse needs to maneuver from Texas to California for a brand new job. Would this jeopardize our retirement?
We need help to see if moving to Northern California would seriously damage our retirement plans.
My wife, 45, and I (42) currently make about $ 425,000 a year. We saved $ 775,000 for retirement and $ 97,000 for our three children’s college funds – they are ages 8-17.
My wife’s employer recently asked her to take up a full-time job, but she declined. Instead, she’s been looking for jobs in several high-cost areas of the country. We’re primarily focused on San Jose, California, but we’re also moving Portland, Ore. and Queens, NY into consideration
We currently live in Houston, Texas having a very nice three bedroom home in a very well located area with a mortgage payment of $ 4,300 per month. The cost of living in Northern California is significantly higher, and I would expect a similar home could cost twice as much.
We had a plan to pay off our current house in six to seven years. But with this change, that plan is out of the window. So the question is: are we currently on our way to retiring comfortably, and will we run the risk of not saving enough if we move to a more expensive area of the country?
Not sure about NorCal
‘The Big Move’ is a MarketWatch column that covers the ins and outs of real estate, from finding a new home to applying for a mortgage.
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Better not be sure
It is a good thing that you and your wife are clearly being careful about this important decision. Moving off-road is in no rush, especially if you have kids and savings.
I took your question to financial advisors to get their opinion on how much the high cost of living in the wider San Francisco-Silicon Valley area should make a difference, and many have been surprised at the move your family is considering.
“This is the opposite of what many others are doing. They are moving from the big cities to the countryside, ”said Thomas F. Scanlon, a certified financial planner and accountant based in Manchester, Connecticut. “They’re also moving from high-tax countries like California to non-income tax states like Texas.”
Scanlon has made it clear – although you’ve probably thought about it – that when your wife is looking for a new job, she should consider what remote working options she has. And admittedly, I find it a little strange that your family is considering uprooting your life in order to move for their job.
You don’t say what your job is, but you mentioned your reluctance to work full-time, at least in your current job. So I can imagine that your family is not explicitly dependent on their income to make ends meet, otherwise I would have expected that they would have accepted the full-time offer even though they would have considered other options.
When it comes to retirement planning, you are definitely on a solid footing so far. Financial experts suggest that people over 40 should focus on maximizing their income. Perhaps your wife finds herself in a job with the most lucrative opportunities outside of Texas. That would be a good rationale for moving, but remember that you should consider how moving will affect your career and income potential.
“We want to evaluate increased income expectations versus new taxes,” said Shon Anderson, president and chief wealth strategist, Anderson Financial Strategies in Dayton, Ohio. “It would have to be quite a bit, since California has a very high income tax as well as higher property taxes.”
Experts say people in their forties should set aside between 8% and 15% of their salary, plus extra cash if possible. So when considering whether or not San Jose is worth moving to, this number should be kept in mind. How much are you now saving in percentage terms and are you already achieving this goal?
“‘We would like to assess the increased income expectations compared to new taxes.’”
Then crack the numbers. Contact an accountant in the state you are considering and ask them what your tax bill would be. Research property values in the neighborhoods you plan to live in to see how much housing would cost. If you already have connections with people in the area, ask them how much they spend annually on things like gas, food, and entertainment.
If you add it all up, you will find out how much it would save your budget and if it would leave you behind when it comes to your retirement goal. And don’t forget that retirement savings are separate from what you have to save for your emergency fund and your children’s college funds.
Also, when considering moving, I would recommend not assuming that you are buying a home. To say that homes are expensive across California would be an understatement. Many families in and around the San Francisco Bay Area have moved dozens of miles away to cities like Sacramento and spend hours commuting just to buy an affordable home.
“In many parts of the country renting is the more financially strong step compared to buying.”
For many people, owning a home can be a worthwhile endeavor in many places. But there are cases when it doesn’t make sense. Rents are also very high in this part of California, but you will find that the monthly costs are lower than if you owned your own home. In many parts of the country, renting is the more financially sensible move than buying it – provided you invest the savings wisely.
Renting at least for the short term might be a better option than buying a home right away. It would give you time to settle in the area and confirm that you like where you live before putting down more permanent roots.
Whatever decision you and your wife make in the end, I want you to take to heart the fact that the two of you have already made many financially sound decisions. As long as you take the same approach in this next phase of your life, I am confident that it will work out well for both of you. Much luck!
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