Laurie emails: I'm confused about how income tax works when it comes to retirement. If I retire from a job in CA with a state pension program (PERS), but move to a state with no income tax (say, Washington), do I still pay CA income tax or do I get my CA retirement pay sans the tax? Just trying to plan for the future!
The simple answer is no, you would not have to pay income tax if you moved to an income tax-free state. In general, accounting experts say, if you earn a pension in one state and then move to one of the country’s nine non-income tax states, the pension becomes tax-sheltered. It’s also non-taxable in the state you lived in previously. That’s a big reason why retirees move to Florida in droves.
One caveat: “This applies to full-year residents in non-income tax states,” says Mitchell Freedman, a certified public accountant at MFAC Financial Advisors in Westlake Village, Calif. “If an individual is a part-year California resident and a part-year resident of a non-income tax state, then part of the taxpayer’s income, including the pension, would be taxed in California and the other part would be non-taxable in the state without income taxes.”
@WhitOwens tweets: My husband and I are moving cross country, West to East. Any tips on moving? Shipping vs. movers.
A do-it-yourself approach would be cheapest, but could be a total headache, especially with such a distant move. Based on estimates provided by moving advice site TheMovingBlog.com, transporting belongings from, say, a one-bedroom home in New York to California could cost between $2,000 and $3,000. That includes the truck rental, mileage, gas, tolls and packing supplies.
My advice is to split the labor between you and a moving company. If you can box, pack, seal and pad most everything yourself (along with a few generous friends), as opposed to hiring a moving company to do this part, you could save 30%, of the total cost, according to Pamela Smith of TheMovingBlog.com. Just avoid making what she calls one of the biggest mistakes self-packers make: packing liquids and perishables. “A lot of people are packing detergent, wines liquids, food… and when it comes to storage [on the truck] that can create problems,” she says. “Moving companies will not knowingly move these hazardous materials. If you pack wine or detergent and a bottle breaks, that can affect everything in the truck and create a tremendous amount of damage.”
Do invest in professional, qualified movers for the actual moving, though, to help you safely transport your belongings across state lines. The best piece of advice I have related to hiring movers is to not hire a company simply based on price. Be skeptical of low quotes. Sometimes it’s worth every penny to pay more for reputable and reliable movers. Seek recommendations from friends and relatives, as well as from the American Moving Storage Association. Check reviews online, too, but don’t buy into all the hype. If a company’s testimonials are all positive on, for example, Yelp.com, that’s “a red flag that maybe the reviews are fake,” says Smith.
Finally, refuse to accept any quote that’s provided over the phone or online. It’s likely to get adjusted higher come moving day, so insist that a rep come to your house, size up your belongings and give you a quote in writing.
Got a question for Farnoosh? You can reach her on Twitter @Farnoosh or email her at firstname.lastname@example.org.