Relocating to a tax-friendly state? Check with your financial advisor first

The rough numbers look pretty rough for high-tax states with more and more Americans relocating to alleviate their financial burdens. And that’s got wealth managers studying US geography as much as the stock market tables.    

In 2025, Florida remained a top destination for New Yorkers, with more than 70,000 residents reportedly moving to the Sunshine State in search of lower taxes, job growth, and a desire for warmer weather. Similarly, over 100,000 Californians were said to have emigrated to Texas last year to ease their tax and regulatory burdens. 

Some of these folks, if not all, checked in with their financial advisors before making the move to make sure it was the right one.

InvestmentNews sat down with Jody D’Agostini, financial advisor with The Falcon Group in alliance with Equitable Advisors, to learn the specifics about this migration to tax-friendlier states, as well as explain how she is counseling clients considering such a move.

InvestmentNews: Are you seeing an increase among clients near and in-retirement moving to tax-friendlier states like Texas and Florida? Where are they moving from?

Jody D’Agostini: Increasingly, the conversations with clients include whether they should consider a move from NJ, where my practice is based, to a more tax-friendly state in retirement. This move could help maximize their retirement income and lower their tax burden. Many clients consider the low or no state income tax states but also are looking at the additional taxes imposed such as property, sales, and estate taxes. There currently are nine states with no state income tax -  Alaska, Florida, Nevada, New Hampshire, Tennessee, Texas, South Dakota, and Wyoming.

These states also do not tax Social Security income along with 33 other states. There are 14 states that do not tax retirement distributions from IRA’s and 401(k)’s. They include the aforementioned nine states plus Illinois, Iowa, Michigan, which is capped at certain income limits, Mississippi, and Pennsylvania. Most require you to be at least age 59 ½. 

California, Illinois, New Jersey and New York are known to be some of the highest income taxed states coupled with higher property taxes, housing, and overall cost of living.  NJ has topped the list for migration out for eight years in a row and over 25% were retirees. California had the largest net loss of residents over age 65 followed by NY and IL. I’m seeing clients move to Delaware and Pennsylvania are from NY and NJ as they are more tax-friendly to retirees, but still close to friends and family.

InvestmentNews: Generally speaking, how much do different state tax structures affect retirement income? 

D’Agostini: They can hugely impact the net income available to provide monthly income in retirement. For example, California’s top income tax bracket is 13.3%, New York at 10.9%, and New Jersey at 10.75%. Those are real dollars lost to provide income. It’s estimated at $7,000 to $10,000 per year for middle class retirees and up to $180,000 to $400,000 over a lifetime. This can make the difference between clients just paying their bills and enjoying the quality of life that they have worked so hard for.

InvestmentNews: How do you help clients assess whether a move makes sense? How do you make sure it’s worth the trouble?

D’Agostini: I start with the financial plan and run scenarios for staying and other destinations clients were considering seeing how their cash flow and net worth play out. Many clients want to provide a legacy for their children, so it is comforting to see what that might look like. Next, I like to have clients visualize retirement. What would a typical day look like? What additional activities will they include and are there any other retirement expenses that will crop up such as taking courses, travel, starting a business, etc.? Then the decision can include what they would like and what they can afford. Sometimes the decision is to retire locally but downsize and capture some equity. 

If a client’s vision includes time with friends and family and the current social network is important, then that can help drive the decision. Many clients want to be by their children and grandchildren to continue to make memories as they age. Also, access to competent and accessible health care is a large consideration. Are there specialists that are accessible if and when needed?  Are emergency services available?  Medical expenses can be as much as 15% in retirement, which means this should be a major consideration. The overall cost-of-living factors in as well. What are the prices for your fixed expenses in retirement such as food, housing, utilities, and transportation?  Also, the cost for homeowner’s, hurricane, and flood insurance have been rapidly changing making more tax friendly states surprisingly expensive as natural disasters have impacted insurance rates. 

When clients are considering a move, advisors can help them look at the “all in” number considering the sales taxes imposed, property taxes or additional fees collected. Also, clients need to examine the cost of housing, medical care, food, entertainment and recreation in the area. The retiree spend/budget can be quite different than the budget while still employed. Another important consideration is whether the state imposes estate or inheritance taxes. Twelve states and the District of Columbia have state estate taxes on top of the federal estate tax, and five states have inheritance taxes. This can be up to 20%.

InvestmentNews: What have you found to be the biggest post-move challenges?

D’Agostini: Change is difficult at any age, but when clients uproot from a place where they have worked and raised a family it can be most challenging. Advisors should encourage clients to consider what life would be like apart from friends and family. Clients often have created a nucleus of friends and social circles that will need to be created again. It is more difficult to make friends when you do not have shared experiences together and takes time and effort. Clients will have to be more intentional about creating new connections through a faith community, social and recreational circles. 

They will also have to establish a network of new referrals for their medical doctors, dentists, and everything from electricians, plumbers, and handymen. Clients will eventually find “their people”, but they will have to put themselves out there to do so by joining a church, synagogue, club, or volunteering at a non-profit that speaks to them.