Save $133K – $1M by moving to Texas from CA

9/30/13
 
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from NCPA,
9/30/13:

Scott Burns, a registered investment adviser, recently sat down with Pamela Villarreal, a senior fellow at the National Center for Policy Analysis (NCPA), to discuss a new tool at the NCPA’s website — a free calculator that will estimate the lifetime value of moving from one state to another.

Yes, you read that right: The lifetime value. Not just whether you can afford a move today, but the long-term impact on how much more (or less) you’ll be able to spend each year or leave to heirs.

Example of testing the move from California to Texas:

A 40-year-old worker, who is single, earns $70,000 annually, has $70,000 in retirement accounts, $70,000 in taxable savings, rents in California at $1,500 a month and intends to rent in Texas at the same amount.

After pressing the “calculate” button, the 40-year-old worker will gain $1,615 a year in spendable income by moving to Texas.

If the money is saved rather than spent, he or she would have an additional $133,593 in his or her estate.

That’s nice, but not exactly earthshaking. (Then again, the long-term gain is nearly two years of her salary.)

“What if she moves so she can become a homeowner?” I ask. Ms. Villarreal has Charming Angela take $40,000 from her taxable savings for the down payment on a $200,000 condo. It has a $160,000 mortgage, with an $810 monthly payment. She presses the “calculate” button again.

We gasp. “Maybe we should call her Lady Gaga!” Ms. Villarreal exclaims.

Moving to Texas to become a homeowner will add $12,692 a year in spendable cash. It will do this every year for the rest of Charming Angela’s life. If she saves the additional spending power and maintains her current spending level, the move will increase her estate by a whopping $1,049,571. All in dollars of today’s purchasing power.

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