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More baby boomers stay in their homes as they reach retirement, skipping downsizing

Discussion in 'TUG Lounge' started by MULTIZ321, May 21, 2019.

  1. CalGalTraveler

    CalGalTraveler TUG Member

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    They were not US citizens and had explored that live aboard ship and living in several different countries during the year to avoid taxes altogether. But they finally settled on Costa Rica. I am not sure if they became citizens. There are publications that cater to the ex-pat crowd on such decisions
     
    Last edited: Jul 11, 2019
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  2. VacationForever

    VacationForever Tug Review Crew: Rookie TUG Member

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    We do limit rentals to a minimum of 1 year lease.
     
  3. klpca

    klpca TUG Review Crew: Veteran TUG Member

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    Make sure to check with a CPA or tax attorney on the hoops that you need to jump through to prove that you aren't CA residents, or this will all be for naught. The FTB has an enforcement section set up to specifically address residency issues. CA taxes worldwide income for residents and CA source income for non-residents. It can be done, but they are waiting for you to trip up.
     
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  4. vacationtime1

    vacationtime1 Tug Review Crew: Rookie TUG Member

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    Keeping a residence in California will be a bright red flag for the FTB. Get professional advice before you take irrevocable steps.
     
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  5. PcflEZFlng

    PcflEZFlng TUG Member

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    Quite true about the FTB - they go after CA expats in a big way. Be very careful!
     
  6. isisdave

    isisdave TUG Member

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    If you're a US citizen (or, I'm guessing, if you're a US permanent resident) you owe income tax on any income generated worldwide regardless of where you live, except possibly for the Overseas Earned Income exclusion, which requires you to be gone 11 full months of the year and only covers wages and self-employment income. The only way to avoid this is to renounce your citizenship.

    Getting citizenship in Costa Rica does not require you to relinquish your US passport (in fact US citizens are required to use US passport to enter or leave the US) or citizenship, but it won't relieve the tax obligation.

    When leaving an aggressive-tax state like CA, it's best to move first to a different US state with no or little income tax. Stay at least 6 months. Join clubs and a church, register to vote, get local doctor, driver's license, buy a house if possible. If the state has an income tax, file at least once. Meanwhile, divest yourself of the old state -- and this may be difficult if you own property or have a professional license there.
     
  7. Ralph Sir Edward

    Ralph Sir Edward TUG Member

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    Yes, the US does not have civilized tax laws, unlike other OEDC countries. . .
     
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  8. Brett

    Brett Guest

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    maybe those "civilized" OEDC countries have VAT, social taxes, wealth taxes, real estate, personal income, corporate taxes, health care taxes and high inheritance taxes .... and yes, a tax on stamps
     
    Last edited: Jul 12, 2019
  9. Ralph Sir Edward

    Ralph Sir Edward TUG Member

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    Let me explain in more detail.

    The US bases its income tax based on citizenship.

    The rest of the world bases it upon residency.

    A tax base on citizenship requires a person to be taxed, anywhere in the world, no matter what income taxes already being paid in the country of residence. So one is paying for services (roads, social services, ect.) to a country where you are not using any of those services.; plus taxes in the country in which you are using those services.

    A tax based on residency requires a person to pay taxes only in the country in which the person resides.

    Example: person in country X decides to live in country Y. If country X taxes on citizenship, the person (absent a tax treaty between country X and Y), the citizen pays income taxes for both country X and country Y. The person is not using any services of country X, but the person still pays.

    If country X taxes based upon residency, then the person only pay income taxes in country Y, where the person currently resides. After all, the person is using no services of country X, why should that person be paying for them?

    (Most sales related taxes are inherently residency based. . . )
     
  10. Brett

    Brett Guest

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    right, and you can subtract all those 'civilized' taxes you have paid if you're a US citizen residing in another country
    compare all the various taxes among all the countries in the world .... US comes in low !
    except for Cayman Islands, Channel Islands, Hong Kong, Antarctica ....


    .
     
  11. Ralph Sir Edward

    Ralph Sir Edward TUG Member

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    You can only subtract them if there is a tax treaty between the two countries. OR. to quote ISISDAVE "except possibly for the Overseas Earned Income exclusion, which requires you to be gone 11 full months of the year and only covers wages and self-employment income." Money received from investments would be double taxed.

    Think of it in terms of living in US states. You pay state taxes in the state you live in. Agreed? Would it be fair to say that, if you were born in California, you would have to pay California state taxes, for the rest of your life, no matter what state you lived in, just because you were born in California? Plus whatever taxes you had to pay in the state you lived in?

    Now substitute US for California and ask the same questions. . .

    The only reason I mentioned this was that people here are travellers, and like TravelTime, may not have researched the tax headaches of being an expat US citizen. And those headaches are unique to the US. . .
     
  12. Brett

    Brett Guest

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    well, actually you pay California income taxes if you worked there (not a lifetime)
    but think in terms of immigration - emigration

    The HUGE number of US citizens leaving the US because of "uncivilized" taxes vs the slow trickle of immigrants coming to the US (presumably not afraid of the uncivilized taxes here)
     
  13. Patri

    Patri Tug Review Crew: Rookie TUG Member

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    Or not planning to pay any because everything is free.
     
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  14. Panina

    Panina TUG Review Crew: Elite TUG Member

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    The article said “A more modest home typically means less upkeep and a potential financial windfall as a big chunk of the proceeds from the sale of the larger property can help bolster retirement nest eggs.”

    Being I have been looking for 50+ communities, I can say it will cost me more to buy then what I will get selling. I am not in a major metropolitan area. I am in an area where housing is affordable. I also live in a very desirable community where homes usually sell wihin 3 days.

    To make the lifestyle change will cost me more not only in price but in real estate taxes too. Smaller house, higher price, more taxes, doesn’t make sense but it is what is happening. There is another reason more baby boomers are staying in their home at retirement, they can’t afford to go elsewhere.
     
  15. Icc5

    Icc5 TUG Member

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    Almost 10 years ago we decided we're not going anywhere for our retirement. When we sold our other house we decided since we will stay in California we want our dream house. We bought my wife's big family home out of the trust (her brother's bought the 2 smaller houses) and we put a few hundred thousand in it to add air and completely remodel. Our house is 4 bedroom and 2 and1/2 bath with a huge dining room and a huge game/craft room ( my wife is very crafty with a fascination for gourd art.
    When family comes we have the space and all family get togethers happen here. We love being the center for family. We were able to keep the house under prop 13 so property tax isn't bad and we love our location off the beaten path. It's nice to see the value of the house constantly rise but it really doesn't affect our decision making.
    Bart
     
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  16. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    When we bought in Florida 16 years ago, cost us 20% more . House was newer, community had many amenities compared to none in old community, square footage close but northern house had full finished basement., bigger yard up north, but Florida taxes way less than Illinois.
     
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  17. bbodb1

    bbodb1 TUG Review Crew: Veteran TUG Member

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    Bart,

    Glad to hear y'all are getting to do what you want with your housing situation but might I ask the following: what will y'all do with all that extra room as you get older? I'm asking this because we are currently considering what to do when we retire and our (current) 2350 sq ft home with 4 BR, 2 bath is a lot more house than we will need 99+% of the time.

    In other words, will you make use of the entirety of the house most of the time?

    I certainly get the extra space is nice when family comes by but how did y'all address the downsides to this extra space (heating / cooling / upkeep)? Did your remodel help address this (perhaps putting in zones to heat and/or cool the extra space as needed)?

    We're at a similar decision point that you describe and are working through this decision too. In our case, just about ANY move is going to increase our monthly living costs (even if we downsize) because the COL in Arkansas is among the cheapest in the country.
     
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  18. amycurl

    amycurl TUG Member

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    Just for a hoot, I clicked on the link for The Villages....and *every single person* in the video clips and photos was white. 45% of Florida's population is comprised of people of color, but I guess none of them live in The Villages?
     
    Last edited: Jul 14, 2019
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  19. VacationForever

    VacationForever Tug Review Crew: Rookie TUG Member

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    I am not Bart but for our 2835 sq ft home, it feels "small". The 3 BR are all ensuite and 2 of the BRs are guest rooms. We only need to clean them before and after we have guests. The doors to the 2 BRs are closed to keep our cat out. We wish we have more (open) space in the living/dining/family room(s) like what we had in our prior larger home. It does cost more to heat and cool but we like the flexibility of being able to host friends and family.
     
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  20. mpumilia

    mpumilia TUG Review Crew: Veteran TUG Member

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    In our case, leaving our huge property and driveway situation out of the equation, with a 2600 square foot house we essentially could almost just live downstairs if we had to and be fine. We spend most of our time down there anyway. And only one short step out the doors all around the house, including from the garage.

    But we have no big family. We have one son and he is not married - no grandchildren.

    Even though we have friends and family in NY, we never see them. Maybe a few once per year. So we will move near our son and to a state and area we really like. If anyone wants to visit us they can get a hotel. Our table can seat 6. (well- really 10 but in the new house there will be no room to open it up). And in our new house living room- 4 people as we will not be able to fit the other chair in there like we have now.

    The new house will have 4 rooms plus 2 bathrooms and a basement and garage.

    The front porch can fit maybe 4 people.

    The lot is like a postage stamp. But people - whoever they may be-can sit around in the back. Then again, we only have 2 camping chairs that we use to sit outside now even here at the big house. We have downsized a lot already! LOL!

    There's a clubhouse if we need room for a bigger gathering, but we won't ever need it.

    I can tell you living right now still in our bigger house and having divested ourselves of a lot of stuff already, we don't miss any of it, though we loved a lot of the things. Giving them away was and is still a bit hard, but once it is out the door all is well. Very freeing.

    PS Moving we are not saving any money either in terms of the home cost and moving expenses (and rental costs that will be incurred until the new home is built). The new home will not be anywhere near as beautiful as our current home and I intend to try to hold the line on upgrades at this stage of life. Yet it will cost probably as much as we will net from the sale of our current home of 32 years (IF we are even lucky with that! If not we will have to make up the difference with some savings)- crazy, especially when you consider the size of the new house and lot! AND- with the new house we will not even own the lot the house is on (compared with the 10.5 acres we own now!)!!!!

    PS- Right after we signed, the builder raised the prices on all the models. For us it would have been $7000 more! Phew! We just made it!

    But once settled in, the costs should be less even with the HOA fees (currently $150 per month). Taxes are $4300 compared with our almost $10,000 now. No plowing bill as the snowblower will handle the tiny driveway.

    Propane heat instead of oil- but only an 1100 square foot home. We will have a water bill now instead of a well. Electric rates are higher in NH. Sewer instead of current septic. No fireplace so will not be buying wood.

    New home has no trees to worry about with falling and emerald ash borers and all that. Sealing the smaller driveway will be less expensive than it is for our 700 foot one. No more maintaining a deck or bridge. No mowing for my husband anymore as the HOA does it. Trash pick up is also included in the HOA fee. Here it is $37 per month. Plus, we get use of a pool in summer. No pool at our current home.

    This all said, in the winter especially it is nice having space to walk around in and separate from the spouse occasionally. It will be a big adjustment in the smaller home. But down the line as we get older- in our late 70's and 80's- I think we will find this was a good decision. All one level. Easier to clean. Simple. Hopefully we will both be here together still, but if one passes, the home is still suitable.
     
    Last edited: Jul 14, 2019
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  21. isisdave

    isisdave TUG Member

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    Ya know, we're currently catsitting in a 1200 sf 2 br apartment with a pretty good balcony, instead of our 3100 sf 4 br home. Add a craft room for DW and a 1 car garage and it would be big enough for long term living.

    But we're keeping the house as it costs us half what this apt in San Diego would. For now, anyway.
     
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  22. bbodb1

    bbodb1 TUG Review Crew: Veteran TUG Member

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    You said it Dave - and that's what we are running in to. The cost of housing is going to be a significant factor to overcome if we relocate.

    It may not be possible - or fiscally responsible - to even try.

    But I have to find someplace with better weather........
     
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  23. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    I would say the same for our community in Florida.
     
  24. amycurl

    amycurl TUG Member

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    It would be really hard for me, personally, to live in a community that was so not-reflective of the diversity of the greater community. Maybe that's just me; I hope not, because if so, I don't think that bodes well for our democracy.
     
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  25. bbodb1

    bbodb1 TUG Review Crew: Veteran TUG Member

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    What do you define as a community? Is it just the immediate area (a street or two in each direction) around your (potential) home or is it the entire town?

    Would you pass on a perfect or near perfect home in every other factor except the population demographics? If so, you may find choosing your next home to be an even more monumental challenge.
     
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