My state, New Jersey, has become a case study for financial disaster. (Forgive the cynical language, but you try to describe the New Jersey balance sheet and budget with one short phrase.)
Many Baby Boomers are just beginning to contemplate if they’re ready to retire. As a financial planner, I can attest to the fact that every New Jersey Baby Boomer client talks about New Jersey evacuation. Each client has his or her own reason for fleeing the state, and the destinations vary.
However, one state has surpassed the rest in welcoming these refugees, so much so that we call it “God’s Waiting Room.” That’s Florida.
Even if you focus mainly on advising clients or selling life insurance and annuities in some state other than New Jersey, you may find that many of your clients have similar thoughts about moving to another state when they retire. “I could move to Florida” may be as much a part of some clients’ retirement planning thinking as ideas about their likely investment performance.
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To dig deeper into the New Jersey vs. Florida comparison, let’s begin by examining the two most common financial reasons for the exodus from the Sopranos state…
Income Taxes: Florida has none. New Jersey can top out at 11.8% for the wealthiest residents, according to NJ.com.
Property Taxes: Florida taxes on average 0.97% of a property’s assessed value, whereas New Jersey taxes 1.89% of assessed value. New Jersey’s property taxes are the worst in the nation.
Combine Florida’s lower taxes with its much cheaper homes, if you move there, you get instant savings.
So where does Florida get the money for such nice things?
About 59% of state general revenue comes from sales taxes, 13% from the lottery, 5% from corporate tax, and less than 30% from various other sources.
Florida’s sales tax is 6%, plus an additional city tax that in some areas can reach a total of 8.5% (although some items are exempt, such as groceries), according to the Florida Policy Institute.
Even though New Jersey’s income and property taxes hog the negative limelight, the state also has its own flat sales tax of 6.625%.
So, if that tax revenue is enough for Florida, why not Jersey? The Sunshine State has a population of 20.6 million, versus New Jersey’s 8.9 million residents.