Are you thinking about moving to another state? What personal finance considerations should you consider? Be sure you’ve given thought to:
- What’s the best way to handle switching bank accounts?
- When should one roll over a 401k?
- How soon should creditors be notified of an address change?
Here are some important financial decisions to consider:
1. Consider the cost-of-living in potential states.
If you’re moving to another state due to a job change, you may not have a choice in your new state. If, however, you’re moving for retirement or a change of scenery, do your research.
Costs to fund your lifestyle can vary widely from one area to another. For instance, if you’re moving from Tulsa, Okla., to Manhattan, your morning coffee could cost you 61 percent more, to say nothing of housing costs which can be as much as a whopping 500 percent higher.
2. Go slow before buying a new home.
I typically do not recommend that people buy a new home before relocating. It is important to get a sense of the various neighborhoods, their personalities and idiosyncrasies before making such a large commitment.
Consider renting while you get to know your new location. When you find an area you love, then you can start looking for your new home.
3. Have your estate plan reviewed and updated by an attorney in your new state.
Different states have different laws and taxes; it would be a shame if your intentions were disregarded because of different laws.
4. Are you moving due to a job change?
If so, your moving expenses may be tax-deductible.
Of course there are rules that must be followed, but generally if your new job or new job location is at least 50 miles farther from your prior home than your old job was, you may be able to deduct your moving expenses.
For example: If your prior commute was 10 miles, the commute from your old home to your new job must be at least 60 miles. You’ll also need to be working full-time right away. Talk to a CPA for more details on this, and make certain that you keep your receipts.
Note: While any gains that you enjoy on the sale of your home may be taxable, provided that they exceed $250,000 for single homeowners or $500,000 for married homeowners, losses on the sale of a home are unfortunately not deductible.
5. Switching bank accounts may not be necessary.
These days, many of the larger banks have coast-to-coast footprints. If you’re a customer of one of the large banks, check to see if they have branches in your new state.
As soon as you’re living at your new address, call your bank to have your address changed. Ask them if you’ll need to close your old accounts and open new ones.
Even though your bank may have a branch in your new town, technology constraints may prevent the branch from efficiently communicating with the account in your previous state.
This is especially an issue for recently merged banks and can be frustrating for customers. If you are a customer of a small bank or credit union, it is likely that you’ll have to switch.
Open your new account early and transfer in some money. Make sure that you leave enough money in your old account to cover any outstanding checks and debits.
Remember to change the account information for any auto debits that you may have. I recommend leaving the old account open for a few months just to make sure. If you have a safe deposit box, be certain to gather the contents before leaving town.
6. Update your address with other financial institutions with which you do business.
Some common examples are:
- IRAs and investment accounts;
- college savings plans;
- life, auto, and liability insurance companies;
- loans, including auto and student; and
- credit cards.
You typically do not need to notify the credit reporting bureaus of an address change; your creditors will do this for you once you’ve notified them. It is a good idea to check your credit reports about 45 days later, just to make certain this happened.
For help, log onto www.annualcreditreport.com for a free credit report. Be sure to notify the Social Security Administration of your address change, and it’s a good idea to let the local taxing authority in your old location know, too. Especially if they levy a personal property tax.
Filing a change-of-address form with the Post Office will help to ensure that anything that may have slipped through the cracks finds its way to you for up to one year.
7. Consider all the options for your retirement plan with your previous employer
If your location change is due to a new job, notify your old HR department as soon as you know your new address, and make certain the records show that you have terminated employment. This will help the transfer process move along smoothly.
If you have an existing IRA, you should consider adding in the funds from your old employer’s plan.
As always, it makes sense to get some professional advice during this time, as there may be tax issues or planning opportunities that go along with this life event. If you work with a financial planner, they can assist you in this transition. Consider all the options for your retirement plan with your previous employer. You can leave it, cash it out, roll to an IRA or roll to new plan.