Will Moving Affect Your Roth Conversion Strategy?

[@terryadams1830]

Another great video. Thanks! This one is particularly important to me as I MAY be moving from a no-income-tax state (Florida) to a state with a 5% income tax (Alabama). As I won't be moving for at least a couple of years, I'm running the numbers on how to transfer my remaining before tax 402K into my ROTH that gives me the minimum tax burden.

[@terryadams1830]

"401K"

[@mr.j2776]

@@terryadams1830 I lived in Florida for two years. I should have done some conversions then. If you have a chance, might be a good idea!

[@SafeguardWealthManagement]

Thanks, Terry. Yes, this is basically the flip case from the example in the video. Depending on your situation, that is completely doable.

[@ianollmann9393]

Note that the California 13.3 rate is for 1M and above. For more normal 200-600k it is 9.3%. Not cheap, but not 13.3%

[@captsorghum]

The 9.3 rate starts at 57k for singles, 115k for couples. The combined tax rate for someone in the 22% federal bracket is actually lower for T-bills (state tax exempt) than for qualified dividends (15 + 9.3 = 24.3%).

[@ianollmann9393]

@@captsorghum Though clearly those are for different uses. T-bills are unlikely to outstrip inflation long term in the way dividends do, but are a reasonable place to keep cash short to medium term when stock beta is too high.

[@captsorghum]

@@ianollmann9393 I was thinking more in terms of asset location. T-notes in the taxable account, dividends from the Roth (where practical).

[@johnsdsl]

PA and IL both have an income tax on wage income, but they do not tax retirement income. These are just two of many asterisks that could be added to the tax map. You really have to look carefully. South Carolina, for instance, has an very low effective tax rate for $60k in retirement income, but a terrible rate (7%) if you make a $600k withdrawal.

[@SafeguardWealthManagement]

Good add John. I tried to refrain from talking about specific states too much because there is such a wide range of taxation rules.

[@captsorghum]

From what I've read, California is especially nasty about people leaving. Be sure to change all drivers license, vehicle and voter registration, and surrender the CA ones. Also do an address change for all accounts and other contacts, possibly even your mobile phone to make sure you don't have a CA prefix. Also file a CA non-resident tax return from your new location start a time limit on any future CA tax audits. And don't do any Roth conversions or big capital gain sales during the year of the move, unless you plan to declare them in your final CA tax return. Best bet is probably to consult a CA tax lawyer before you move, to make sure you're protecting yourself from future audits. Needless to say, moving out with the intention of moving back in a few years seems reckless. I half expect to see a Berlin-style wall erected somewhere between Truckee and Reno in order to keep residents from escaping.