The 'Couv'

The 'Couv'

Tuesday, April 23, 2019

For Many Retirees, Income Tax is a KILLER!

Let's look at why an income tax is more of a killer than a sales tax especially for retirees. Retirees often do not have many tax deductions or exemptions. So a retired couple earning a taxable household income of 35,000 will pay about $3150 in Oregon State income tax. Contrast that with the a typical annual sales tax paid in Washington at $1200.

Sales tax is something you only pay when you buy a taxable item. In Washington food for example is not subject to sales tax. An income tax is levied before you receive your net check. You are going to pay it whether you buy things or not. Sales tax is almost always a lower expense than income tax with the notable exception of being poor. Those in Oregon who have a taxable income of $0 will not pay any income tax, obviously. But in Washington a person with a taxable income of $0 will still need to buy things and some of those things will be subject to sales tax.

Please take note I am using taxable income, because retirees are not subject to income taxes on a sizable portion of their Social Security, ROTH IRA's are tax free, and standard exemptions and deductions reduce taxable income. So someone earning $20,000 could in fact have a taxable income of $0.

So the rule of thumb is, if you are poor live, in Oregon, if you are middle or upper income, move to Washington. Well it isn't always quite that simple, but that simple solution is not to far from reality in actuality.

Tuesday, March 26, 2019

High-rise Condo Living, well suited to Retirees

Many retirees are looking for living arrangements that don't require a bunch of yard work or travel to get to activities. Downtown urban condo living could fit the bill quite nicely for some. In SW Washington, Vancouver has a nice opportunity to own a high-rise condo unit with views of the Columbia River, Esther Short Park, and as many as five Majestic Cascade Volcanoes.

A short ride down the elevator to the street offers up everything your need in a few blocks. restaurants, post office, stores of all kinds, the park, waterfront, government agencies, banks, insurance, you name it and you can walk there.

This style is not for everyone, but it could be for quite a few retirees. 2 bedroom units range from $300,000 to well over a million dollars depending on the view and of course the interior decor and quality. Vancouver's downtown and waterfront area is rapidly becoming the hot spot for urban living in the Portland-Vancouver metro area.

You can visit Urban Living in the 'Couv' for updates on condos for sale and project status for new and upcoming high-rise projects.

Tuesday, February 26, 2019

Limits on SALT Makes Washington State Even Better!

SALT an acronym for "state and local taxes." The recent tax changes now caps state and local tax deductions at $10,000. So high income retirees are limited to that figure for deducting these "SALT" payments from their federal taxes.

Washington State levies no personal income tax so their is another benefit against states like Oregon and California that have a heavy income tax. In Oregon one needs to make only a bit more than 100k with average property taxes to cap that SALT limit out. Be sure to check with your tax professional to see how the federal taxation changes will affect your personal situation, but the mass exodus from high 'SALT' states such as California, New Jersey, New York, and Connecticut is a clear indicator that it is making a difference.

Washington is already one of the best if not the absolute best high latitude state in the US in which to retire. Sun Belt states continue to out poll Washington due almost exclusively to the warm winters and not the economic advantages. Washington State has excellent weather with something for everyone, really. Well you won't find any 75 degree January days, but aside from balmy winters, we have it all.

Washington and in particular Southwest Washington, offers an amazing blend of mild weather, favorable taxation for the retired, and proximity to Oregon for the interstate economics. Playing in Oregon is not subject to sales tax, living in Washington is not subject to income tax. Best of both.

It is more than just a bit likely that thousands will again flee the 'salty' states of California and Oregon to the beautiful Evergreen State of Washington.


Tuesday, January 22, 2019

Local Impact of California Exodus

The great California Exodus continues as both families and retirees are fleeing that state in droves. Epic levels of taxation along with a crumbling infrastructure and a middle class on the verge of extinction has led to an migration of biblical proportions from the Golden State. Californians are moving to Texas, Arizona, Nevada, Oregon, as well as Washington, Idaho, and Montana in numbers that have never been seen before.

Here in Southwest Washington Oregon continues to dominate the list of states sending people our way, but that makes sense as they are a border state and Clark County is just a river crossing away. But California is the number two state sending people here and it has been for quite some time. State wide California is the number one exporter of new residents. Yes even more than Oregon. California is number two for Clark County but is easily number one statewide.

But the population of California has been dropping but not as fast as the domestic migration might suggest. Even as tens of thousand leave every month thousands more pour into the Golden State to fill some of the vacancies left by those who migrated out.

Locally real estate prices have been impacted by this additional market force and for some this is irritating as they view it as outsiders driving up values; but many others like the fact that the extra demand makes owning real estate a better investment. For retirees the extra attention means home owners can count on being able to cash out their residence when the time comes or utilize a reverse mortgage to access equity later in life.

Our local market is not feeling the California effect nearly as much as Seattle is. Our out of state migrants are by far mostly Oregonians moving locally across the river. Many Oregon retirees are tired of sending 9% of their income to Salem and find Washington's lack of an income tax refreshing. Californians are actually moving to both Texas and Arizona in far greater numbers than they are sending north to Oregon and Washington.

There really isn't a strong impact from California in Southwest Washington. The value difference between Portland and Vancouver does create a bit of a pressure point but the difference is not enough to stress the pricing here much. Most of Oregon is less expensive than Clark County. In fact of Oregon's 36 counties, only Multnomah, Washington, and Clackamas counties have median home prices in excess of those here in Clark County Washington.

We can roll out the welcome mat to retirees from all over the country, including California.

Tuesday, December 25, 2018

Happy Holidays!

Hey it's Christmas Day so I'm taking it off. I won't leave you empty handed however, take a look at this article from the archives about climate in Washington's wide ranging spaces.

This was originally posted here, by Rod Sager, June 4th, 2014

Real estate tends to perk up this time of year. The sun is shining, the sky is blue, and the temperature is warm. It is easy to get sucked into the greatest summer weather on this planet. But what about winter? Many retirees would love to have a little winter but hate the idea of shoveling snow. Here in Washington State we have options for your winter wonderland. There are places in the Evergreen State like Mount Baker, that have snow so heavy it rivals anywhere in the world. Fortunately those are places people visit rather than live. East of the Cascade Mountains delivers sunnier weather that is warmer in the summer and colder in the winter than this side here in the west. There are many areas that offer an in-between winter experience.

Here in America's Vancouver we have a very mild winter. It gets chilly but rarely gets truly cold. Heavy snow is a twice a decade event and light snow is sporadic every year throughout the winter from late November to early March. Not much shoveling here. As you move up in elevation so your shovel moves up in usage. Those gorgeous view homes up above 1000 feet will see on average double the snowfall down in the city. Move up another 1000 and it's triple.

West of the Cascades you will find the legendary Pacific Northwest clouds and showers. East of the Cascades is California Dry.

East of those mighty Cascade mountains the mercury will plunge down below zero at times and they tend to stay cold from December through February. The good news over there is that those same mountains that block the warm moist air of the Pacific Ocean also block allot of the clouds. Precipitaion on the eastside is dry, dry, dry. So it does snow often but in small doses. Again places like Ellensburg and the Tri-Cities don't have a heavy snow shovel workout.

Spokane will give you a healthy dose of snow with nearly 4 feet falling annually and that rivals Minneapolis. Spokane is not quite as bitter cold as Minnesota and has a shorter winter. If you hate the shovel stay out of the far eastern part of the state.

In case you are looking around in Washington State I have all these little charts for you to consider regarding snowfall and temps. Data was collected from the Western Climate Data Center.

Tuesday, November 27, 2018

Is Real Estate a Good Retirement Investment?

This is a challenging question. Anyone considering investment opportunities for retirement of otherwise should always consult both a professional in the field of either real estate or securities as well as a tax professional.

Real estate can be an excellent investment vehicle for retirees as well as just about anyone in a position to buy property. For retirees or those looking beyond now to the retirement years, it has both pros and cons and both sides should be analyzed before investing.

Over the years I have been both a Realtor® and a financial adviser. I have always been surprised by the number of people that think real estate is a safe investment. Let's be clear, real estate as an owner occupied property is almost always a good thing. But venturing into investment real estate is a whole different animal. Real Estate is neither safe, nor is it stronger as a long term cash investment than many other vehicles. In my 2010 book, 'Don't Panic' I have a chapter dedicated to debunking some common myths about the security and investment value of real estate.

Some might think, "Geez, you're a Realtor®, you should be all in on real estate." I am all in on real estate, but I am also all in on truth and having my clients go in 'eyes wide open'. Historically, real estate has appreciated in value at a rate of about 6.5% annually. Blue chip large cap stocks average about 8%. As a cash investment the large caps are going to perform better and have less risk. There is a bit more short term volatility with the large cap stocks, but that is tempered by better liquidity. For long term investing large cap stocks are almost a buy and forget deal. Maybe a quarterly review and portfolio rebalance, but really not a lot of "work." real estate will keep you busy and can nickle and dime the checkbook with repairs, maintenance, etc.

The biggest advantage to real estate as an investment has much less to do with market gains and much more to do with leverage. Investment real estate is a high value asset that can be easily acquired with only 20% down. Even the richest people in the world can only leverage half of their stock portfolio, but real estate can leveraged to 80% pretty easily. Only the wealthiest among us can afford to buy stocks and other market securities in the $300,000 plus range, yet ordinary Americans, can often by investment properties in the $300k range.

The ability to take 50,000 in cash and leverage an asset worth $250k is the real power of real estate. Typically real estate values grow faster than the rate of interest on the purchase loan. But an investor is getting an average 6.5% rate of return on a $250,000 asset with only $50,000 invested. This is where real estate is king. The property is generating income in the form of rent while enjoying a modest growth in appreciation over time. The one-two punch of real estate is hard to beat when leveraging it with loans, however even as a cash investment, real estate is still solid. The issue with rental properties is much more complex than most people want to deal with, especially in their retirement years. One can always have a professional manage the properties but then that erodes the profit. Real estate is a busy activity for investors, but those that choose it rarely are disappointed.

For retirees or those looking ahead to retirement, real estate has some additional advantages. At age 62, reverse mortgages become an available option, and in some cases investment real estate can be converted to IRA funds. These are complicated systems that should always be discussed with proper professionals before action is taken. A reverse mortgage allows a qualifying senior the opportunity to draw the equity out of their primary residence as cash income for the rest of their lives. This is in effect an real estate annuity. With rates over the last several years being so low, this has been a solid tool for seniors. However rates may reach a point in the future where the reverse mortgage loses appeal.

People in their late 30s to early 40's willing to carry a few rental properties may find themselves in an excellent position upon retirement. Check with your trusted pros and see how you might fare with a real estate portfolio as you prepare for retirement. 

Tuesday, October 23, 2018

Should Retirees Avoid areas with Strong Economies?

That seems like an odd question, right? Frankly, it is odd, yet there is merit to thinking it through. A strong economy is very important for many reasons. There are lots of job opportunities, local governments tend to be flush with cash to keep things operating smoothly, property values tend to rise, etc. So why would all that be anything but great for a retiree? The answer is not yes or no, but rather, "it depends."

Generally retirees are not too concerned with the job market they are after all, 'retired'. Retirees are generally living in the last house they will ever own so property values that are high simply reduce the amount of house they can afford and any future profit is deferred to heirs.

But retirees living in an area with a depressed economy have other things to be concerned with. Crime, quality of services, etc. The retiree may be able to buy a much larger and nicer property in an area that is not experiencing an economic boom, thus quality of life could be enhanced.

In the end it really does depend. Retirees that are going to be on a tight budget may want to consider areas that are not quite as booming so as to keep housing expenses reasonable. Retirees in the middle of the financial pack can consider either scenario and those that are in really strong shape would probably benefit from the robust economic conditions of a boom economy.

Regardless of the financial standing of the retiree, a strong housing market is a valuable friend so long as the property is owned and not rented. Even though the appreciation in value is likely to benefit heirs, there are scenarios whereby that equity can be leveraged by the retiree later in life. A reverse mortgage for example can provide income later in life should other resources become scarce.

There are a great many things to consider before making that decision on where to retire. Consulting a professional financial planner is typically a wise move. Washington State offers a wide variety of areas spreading across a large swath of incomes and property values. No income tax and senior discounts on property taxes for qualifying seniors makes Washington State a fantastic place to retire.