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Convincing spouse (with evidence) about geographic arbitrage - assistance needed!

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  • #16
    The state will figure out a way to get their money somehow- property taxes, sales tax, county tax, city tax.... The big differences I've seen are general cost of living like housing, gas, and groceries.

    If there are cheap direct flights to the geographic arbitrage, that's a plus.

    We are very happy having moved from mid to high cost of living to LCOL. It's not for everyone, but the reduced stress from traffic, a decent public school system, a community that feels like people care, and the ability to afford pretty much everything is nice.

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    • #17
      If stand your ground laws factor into your deicison to live or not live somewhere then I feel pretty bad for you. Most arbitrary and random thing to consider.

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      • #18
        The biggest benefit of geographic arbitrage in medicine is the difference in salary. Entry level medicine is very dependent on supply demand forces, places which are HCOL often have training centers which feed physicians into practices who are willing to work for much less then out in the middle of no-where. Part of the higher payment is probably partially due to less competetion/more demand/more work available, but a large part of it is just a group or hospital cannot convince a physician to come out there to work without offering much more money to start. If you really wanted to convince your spouse and do not have reason to remain in the high cost of living area, I would suggest finding a new job and obtaining an offer so that you guys can compare numbers side by side. The tax benefits and lower cost of living magnify the differences in salary between some places. There is obviously more to life then money though, and if you don't want to live somewhere out in the middle of nowhere, I think that it would take a lot for some people to be convinced to move. There is no sense in moving somewhere where you only need to work for 20 years but be miserable for those 20 years while you are not a work vs being somewhere you enjoy but having to work for 30 years. I considered where I wanted my kids to grow up as the most important factor when we moved.

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        • #19
          Originally posted by MPMD View Post
          Don't let the tail wag the dog.

          It's tough to get data on exactly how this would affect you but check this out: https://en.wikipedia.org/wiki/State_income_tax

          There's a nice graph showing all of the tax added together. The difference between the top (IL = sigh) and the bottom (AK) is 10%.

          This is a forum full of people for whom tithing 10% of the their income to insanely wealthy, tax-exempt, religious organizations is non-negotiable. So when I hear someone talking about how avoiding state income taxes is a critical key to wealth I would point them towards the tithing threads where said tithers point out (entirely appropriately imho) that if you can't live on 90% you probably can't live on 100% either.
          That's a cool chart. If it's to be believed (and I'm very skeptical. It puts California in the bottom 10, below Texas and Florida among others), it looks like the average state gets more tax revenue from property taxes and sales taxes than income taxes, even though income taxes are usually what hit physicians the hardest.

          The only other thing I would add is I would look up pension funding before setting roots in a new state, as massive shortfalls are good predictors of future tax increases.

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          • #20
            Just run the numbers yourself. As someone who's lived in both climates, it is worth the cost and delay in FI to live in the HCOL, desirable (to me) area. Unless you have lived in these types of areas before, I'd be cautious. Life isn't just about money and numbers.

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            • #21
              Originally posted by Lithium View Post

              That's a cool chart. If it's to be believed (and I'm very skeptical. It puts California in the bottom 10, below Texas and Florida among others), it looks like the average state gets more tax revenue from property taxes and sales taxes than income taxes, even though income taxes are usually what hit physicians the hardest.

              The only other thing I would add is I would look up pension funding before setting roots in a new state, as massive shortfalls are good predictors of future tax increases.
              Yeah I mean I'm assuming it's reasonably correct but could be wrong.

              I always think this conversation is funny b/c for as much as everyone loves to pretend like CA and IL are wealth killers the reality is more complex.

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              • #22
                Originally posted by Macbones View Post
                I
                I couldn't agree more.

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                • #23
                  The tax arbitrage is nice, but the bigger benefit by far (for medical professionals) is the ability to earn significantly more in an area where the cost of living is much lower.

                  Paying a lower or no state income tax can save a typical physician a low five-figure sum annually, but true geographic arbitrage can be worth six figures, easily.

                  Geographic Arbitrage: How Geoarbitrage Makes the Great Plains Great!

                  Cheers!

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                  • #24
                    Another person chiming in to tell you to look at TX property taxes and housing prices a little more closely.

                    Honestly, I think it depends specifically on a the specialty, too. Our geographic arbitrage involves moving OUT of Texas.

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                    • #25
                      I've had time off from work and have used some of it to up my spreadsheet game. If you want to set something up in Excel or Google sheets you can model the effect of taxes on your portfolio. I've set up a spreadsheet that has helped me with tax-adjusted asset allocations based on the expected taxes I'll pay upon withdrawal. I can explain how I set it up if you want.

                      I currently live in a 5% tax state. I played around with the tax numbers on the spreadsheet to see what would happen if I reduced the taxes by 5% on all the non-Roth money. For me, it only lowered the after-tax value of my portfolio by about 2.5%. That was meaningful, because I've considered moving to a no-tax state, but 2.5% isn't enough to really sway my decision that much.

                      If I lived in a higher tax state or if more of my net worth was in tax-deferred accounts (I have a lot of money in taxable accounts currently), the spreadsheet would have spit out a different number.

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