Jerry Clancy and his wife, Carol, were always proud to be native New Jerseyans – that is, until it was time to retire.
After a working career that spanned 33 years, Clancy realized he didn’t want to spend his golden years facing cold winters and struggling to pay the couple’s annual $15,000 property tax bill. So they moved across the South Jersey border into Delaware.
“We spent 32 years in Princeton Junction, N.J., paying some $15,000 a year in taxes with high-income tax rates and a 7 percent sales tax,” said Clancy, 79. “We sold our home for $630,000 and bought a new and better one [in Delaware], loaded it with virtually every extra, and paid $500,000. Yearly property taxes were $1,500, one-tenth of those in Jersey, with no state sales tax. Life is good here – we joke here now that we need a ‘wall’ at the Delaware River to keep Jerseyans out.”
Meantime, there’s nothing new about New Jersey retirees heading even further south to warmer climes, but retirees leaving the state these days aren’t all snowbirds. While snow may be a four-letter word to them, they are equally opposed to another word spelled: t-a-x-e-s.
“According to the overall migration pattern of retirees, these individuals are relocating to states that offer a more favorable tax structure than New Jersey in order to avoid paying certain rates for taxes – or in some cases, paying any taxes at all,” the New Jersey Business & Industry Association said in a 2016 study of outmigration trends. “Florida, for example, does not have an income tax and Pennsylvania [at roughly 3 percent is] the 41st-lowest income tax rate in the country.”
So with taxes top of mind for many, it’s unsurprising to see the top destinations for retiring New Jerseyans include Florida, Pennsylvania and tax havens such as North Carolina and South Carolina.
Bureau of Labor Statistics data show that almost 40 percent of the $574 billion in spending by New Jersey residents in 2016 went toward property taxes and mortgage payments or rent.
Still, there are plenty of reasons to retire in New Jersey, with living near the grandkids a big one for many. So retirement planners have two words of advice for prospective retirees looking to come up with a feasible economic game plan: start early.
“Preparing for retirement requires a sound plan, and it’s not something you can start on the eve of retirement,” said Alma DeMetropolis, managing director and senior investment specialist and market manager for JPMorgan Private Bank in New Jersey. “There are a lot of different things [homeowners can do]. There are special kinds of reverse mortgages that can be used by folks who want to use their homes for retirement income. There are ways to take advantage of property tax exemptions that may be available, or exemptions from school taxes other benefits based on age or income level available in the state.”
But NJBIA President Michele Siekerka said the state needs sweeping property tax reform to encourage retiring residents to stay put.
“At the end of the day, it is always seniors who are forced to sell their homes and move because of property taxes,” Siekerka said. “We’ve advocated rebate programs for seniors that never get funded. I would suggest that we need more comprehensive tax reform, because while we’re concerned about retirees leaving, it’s the millennials that can’t afford to buy a new house. So while the older generation is leaving, the new generation is not moving in. We really need property tax reform across the board.”
Sheila Reynertson, public policy analyst at the nonprofit state budget watchdog group New Jersey Policy Perspective, offered a different view, saying that the state should focus more on improving its services in order to get retirees to stay.
“I share the concern that retirees are leaving after they’ve raised their children and have had a good career here, and want to move to a warmer climate or to be closer to grandchildren,” Reynertson said. “But we shouldn’t be trying to stop a small group of people from leaving the state by foregoing a certain amount of tax revenue. People do choose to move to New Jersey for its great assets and its accessibility to New York City and Philadelphia. Focusing our efforts on improving those services and our infrastructure would do more to encourage them to stay.”