Proper financial planning involves many important decisions. Some are seemingly small choices that compound into big results. This may include minimizing non-discretionary expenses, saving regularly, and investing prudently over a long period of time. Other planning decisions may be life-altering. One such decision, which can be immensely beneficial to your wallet, is relocating.
Relocating is not a topic frequently discussed by personal finance gurus. It’s tough to uproot and leave family, friends, and a community to which you’ve grown accustomed. In other words, it’s quite an unpopular suggestion. However, some of the largest expenses for families are those associated with where they choose to live. If you really want to lower your expenses, there are few life decisions more impactful than moving to a community with a cheaper cost of living.
Housing is the obvious example of potential cost-saving by moving. I am always astounded when friends and clients in other parts of the country tell me how much they spend to purchase a new home. In some Midwest communities, a family can buy a large home, on a substantial piece of land, for what it would cost to purchase a “knock-down” house on a small lot in some parts of Long Island, Westchester or northern New Jersey. Often you can’t even buy a tiny studio apartment in Manhattan for the same price. It’s important to note that you do not need to be a pioneer to move outside the New York, New Jersey, Miami, Chicago or Los Angeles areas. As a passionate road-tripper who has explored around the country, I can attest to the fact that there are thriving communities all over the United States with well-established Jewish infrastructure and even multiple kosher restaurants!
Aside from purchase price, another important housing-related benefit of moving outside a large city is the possibility of lower property taxes. The level of ongoing property taxes can be quite onerous in some parts of the country. It is not uncommon to pay 20, 30, or 40 thousand dollars a year in property taxes in some New York metropolitan towns. This is akin to putting a child through yeshiva every year. Except that a child will eventually graduate and get a job, whereas taxes never end and keep rising.
On the subject of yeshiva costs, a recent article in the New York Post discussed the leading Jewish high schools in New York. What jumped out immediately was the price tag. Tuition costs ranged from $23,000 to over $50,000 a year. Granted, there are plenty of other Jewish schools in the area that cost less, but those numbers may seem alarmingly high. Frum families living outside of New York may have options that are significantly more cost-effective, and, in some states, there may even be access to a government voucher system that allots funds to help offset the cost of tuition.
Relocation is not only for young families looking to buy a home and send their kids to yeshiva for an affordable price. It’s also worth considering for folks approaching retirement. Leaving the workforce means giving up a steady paycheck and living on a fixed cash flow from social security and your nest egg for potentially a multi-decade time horizon. This may present a challenge when one has high reoccurring expenses.
Retirees may benefit from “geographic arbitrage.” With this strategy, a person spends their working years in a city where salaries are relatively elevated and then retires to a place with a much lower cost of living. This may help their nest egg last longer. The decision to move is certainly easier for people whose kids or other family members have already moved to one of these lower cost of living areas. Admittedly, it will be a more difficult choice if your family is all concentrated in a high cost of living area. However, before staying put for retirement, it’s important to run the numbers to ensure you can maintain your lifestyle without a paycheck.
A final point worth addressing is the fact that some Jews dream of making aliyah in retirement. Many factors go into that decision, some of which should be discussed in depth with your financial and tax advisors. One financial benefit of moving to Israel is its socialized medicine. Healthcare costs tend to rise as we age. Long-term care, which refers to a variety of services designed to address a person’s health or personal care needs that arise due to cognitive and physical decline, has become a more common reality as people live longer. In the U.S., extensive planning must be done to prepare for these financially burdensome costs. Israel’s system may make the costs more manageable for retirees. While every healthcare system presents its own unique set of challenges, they may also present certain advantages that retirees should take the time to explore.
The stress of moving cannot be ignored. However, the lifestyle and financial benefits of relocation may make it worthwhile. Deciding to proactively plant your roots in another location may lower your expenses and make affording a frum lifestyle more manageable.