The 'Couv'

The 'Couv'

Tuesday, January 27, 2015

Oregon vs. Washington for Retirees

Many Californians are looking for a place not called California to retire. I can understand that, believe me, I get it. The border states and even bordering Mexico are often considered prime for Californians since they are relatively close by. Mexico offers one thing to Californians on the plus side, economics. US Dollars are strong in Mexico. The rest of that Mexican-connection equation is pretty sketchy. Arizona and Nevada are for the most part desert regions and one must feel comfortable in that environment. Coastal and Northern Californians may not want the desert lifestyle.

So many turn to Oregon as the only California border state that is not like living on a sizzling griddle. Oregon has a wide variety of terrain and climate so it is a good look for the weary Californian. Washington and Oregon in many ways are quite similar especially when comparing Northern Oregon to Southern Washington.

Washington has a few distinct advantages over her sibling to the south. Most of these come in the form of taxes and general cost of living. For middle and upper income retirees this can be a critical difference. The chart below shows common fixed expenses. For Washington State the Seattle Metro Area was excluded. I do not consider Seattle to be an affordable retirement spot by any measure so it was deliberately excluded. Gasoline and Natural Gas are nearly identical in cost between Oregon and Washington with Oregon being 1% cheaper for natural gas but 5% more for gasoline. Close enough to call those a tie. Oregon actually has a lower base property tax rate but when you get to the Portland-Vancouver Metro area the property tax rates on the Oregon side have heavy local levies that cause a severe increase in that expense. The chart operates under the following assumptions. Household taxable income of $60,000 per year, $200,000 dollar home, average energy consumption of 20,000 KW/H and $20,000 in annual taxable purchases. This chart furthermore makes the assumption that Washingtonians are not making sales tax free purchases across the Oregon border. You will see that the Washington side saves more than $5,000 annually over their Oregon counterparts in the Portland Metro Area. Outside the Portland Metro Area the savings is still more than $4000 annually.

Since natural gas is nearly identical in both states we could compare homes equipped with natural gas furnaces. Of the 20,000 KW/H of annual usage 60% was home heating. This means the difference between the two states if both houses have natural gas furnaces would be $4700 in favor of Washington. It is the income tax in Oregon that makes the difference. For those living at or near the poverty line income tax is a non-issue. For those with a retirement income such as a pension or well funded private accounts, that aggressive Oregon State income tax will bleed you dry. Honestly, I did not run the numbers for the Seattle Metro Area, but it would still probably be cheaper than Oregon just from the standpoint of this: If you can afford a house in Seattle you probably have a six-figure income and in Oregon you would be giving 10% of that away to the state.

For Californians looking for the California "feel" Southern Oregon is hard to beat, especially in and around Medford. The Rogue River Valley has a very Central California feel to it. It is a little chillier in the winter however than most Californians are used to. Medford is also a bit isolated. The metro area is very small and it is a long drive to Portland or Sacramento (roughly 300 miles either way). Northwestern Oregon and Southwestern Washington are either inside or very close to, the Portland-Vancouver Metro Area and all of the related urban amenities provided by a major city.  

Any retiree considering Oregon as a destination would be remiss not to consider Washington state as well.

Sources of data used in this article:
  • United States Department of Energy
  • Regional Multiple Listing Service
  • Washington State Department of Revenue
  • Oregon  State department of Revenue