Best Retirement Plans

I don't think there's ever a simple answer to your question. Most people, even when they want to leave an area, can easily do so due to family and other ties. All things being equal, people would pack up and move to warm and cheap areas en masse if they could - but they can't. Also - having left NYC about 4 years ago for the sunbelt, there's really no substitute for the richness, culture and excitement of NYC. Please don't take that to mean I regret leaving - on the contrary, my economic, social and personal situation is as good or better than when I left, but I don't think my experience is typical.

NYC and for that matter all large cities will always be more expensive than a low tax state like Florida. It has been a well know fact for years. That is why Florida is full of people from New York city area and NYC population is still growing.

At the end of the day, it depends on your ties to NYC and whether you want to or can afford to pay a premium.

That said, if you are fine living in a 1 bed room no doorman building in NYC, and you would get a 4 bed room house with a pool in Florida and keep 2 cars, the cost difference starts to narrow.

I agree that this is a personal issue and one's ties to NYC make a difference. Its been written that the new tax law will not necessarily result in the flight of many from NYC and I agree that it would take more than a slightly higher tax bill to do so.

But I am interested in understanding whether this could be a trend that will affect the resi markets in NYC area over time due in part to the prospect of higher taxes in the future combined with an aging population. Are rich areas like Manhattan increasingly not for the old unless you are very rich? Seems that way to me simply based on who I see on the street.

NYC faced this issue in the 1960's and 70's when people fled for the suburbs which helped to create much social upheaval as well as a fiscal crisis. Perhaps we are finding ourselves in a similar situation that does not bode well for city living? What impact could this change in attitude affect the commercial real estate markets and the general NYC economy? Could another fiscal crisis be on the horizon?

A few semi-related thoughts:

1) I wouldn't be so sure that the tax changes won't lead to some people leaving NYC, particularly over time. Right now NY is doing the smart thing of looking for solutions.

2) There are a lot of reasons to stay in NY for many retirees. You generally don't need a car; there are a lot of great doctors; a lot of people have strong communities here which are difficult or impossible to replicate elsewhere; there are cultural ties here for many (particularly those closely associated with newly immigrating folks) that provide a great deal of comfort, support and entertainment; there's a lot of options for assistance so that you can live in a partially dependent manner while still retaining a level of independence that might not be possible elsewhere; it's a very safe city overall...

It's a highly personal choice which varies from person-to-person. I do worry about a lot of the uncertainty around taxes, etc., and I hope that things stabilize and that the NY Government takes the opportunity to look deeply into how to legislate in a way to make NY attractive to people and businesses.

My neighbor living in Manhattan will be retiring soon. Wealthy fellow with 2nd home outside NYC will no doubt give up NYC residency and declare where his second home is and save the 4%. He can still enjoy NYC and keep his current condo. He just has to make sure he takes care of the 183 day rule which is not that hard. When you have wealth, you have options and the latest tax plan will encourage more of the same.

Stay in NYC, move to Inwood, look at the beautiful two and three-bedroom pre-war homes you can get there for under 700,000. Rather than having to get on a two and a half hour flight to enjoy the richness of New York City you just get in an Uber or the A train.

Keith Burkhardt

Keith, Inwood is a cool place. I used to finance a bunch of their coop conversions in the 1980's. A little isolated I thought but high value I agree. I also think the north shore of Staten Island offers some great value for some great old houses. Any other suggestions?

I saw an extremely interesting documentary from 1968 on Inwood and its Irish heritage. Its called Goodbye To Glocamorra and can be viewed on YouTube.

I'll be looking that up tonight to watch! I lived in Washington Heights for awhile 160th Street /Edgecombe Ave. Interesting building with a lot of history called the Triple Nickel. What can I say I'm a bit frugal, love the bang for the buck I got! In hindsight I would have went a little further uptown and closer to Riverside.

Actually, what will drive folks from NYC are the close to 70% top marginal tax rates for high earners (esp self employed)

Do the math!

70 percent?

My wife and I have been debating our retirement plans, now probably 10 years away, for a number of years. Having lived here all of my 50+ years, those plans never included leaving the city altogether, but one or both of establishing residency in a warmer winter, low or no tax jurisdiction, or living primarily at our Long Island house, keeping our apartment, or perhaps a somewhat smaller one. But the price of living here has become increasingly less worth it. This city is not run in any way with the best interests of Manhattan residents in mind, and it has lost its soul. Without any need to access the job market (that in many cases offers greater opportunities and pay than one is likely to find anywhere else), the cost and burden of living here is quite hard to justify, particularly in retirement and even if your retirement income is substantial.

By way of example, for year 2016, I paid over 52% of my gross income in income taxes alone (virtually all fed + NY, but including self employment tax, unincorporated business tax, and (modest) income taxes in several states and a few foreign countries). If you add in $70K in property taxes on my apartment and house (which has been increasing at close to 5% per year), the tax burden is asphyxiating. Even if you earn a retirement income of, say, $1MM, once you pay close to 50% of that in income taxes, 7+% more in property taxes, add on the maintenance and other uniquely over-priced NYC fixed costs (parking, insurance, etc.), and retirement is not looking so comfy. Is $200K+ per year cash out of pocket for state and local taxes worth it?

The recent tax changes were the last straw, and make the above math worse. The other option, monetizing both of my NY properties for perhaps close to 8 figures and moving on to a place with a far lower tax burden, seems increasingly like a no-brainer.

300_mercer, yes 70%. Just read this study: https://www.hauseit.com/things-to-consider-before-you-buy-an-apartment-in-nyc/

nyc_sport basically alluded to this. Most people don't realize that self-employed people get especially reamed here. Self employment tax is 15.3%. Plus you have a 4% UBT tax on your earnings, even though you are already taxed once by NYC via the NYC income tax.

Top marginal tax rate is theoretically 70%. Of course we understand that it steps up as your income increases. But at 70% marginal tax rate, does it make sense to work hard and try to earn that next $1,000?

This thread is populated by independent contracts and brokers with their own businesses, did your accountant not discuss this?

Brokers would all be considered self employed even if they're on a 1099 I believe.

nyc_sport good move. Florida has really really stepped up its game recently. Was just in Miami, the boardwalk they installed mid-beach is stunning.

Yes, nyc_sport, we think alike. I wonder why anyone would live in a city where property taxes are so high and one gets very little in return especially if you no longer have kids in school and do not commute to work. And its not just NYC. Even vacation homes in CT, LI, NJ, and many places upstate have property taxes above $10,000.

More and more I considering buying a home overseas where taxes are low and cost of living is reasonable, and simply maintain a pied a terre in NYC. Manhattan in particular is becoming dominated by empty nesters and retirees who feel trapped.

What will NYC be like in 10 or 20 years? It is no longer the city I fell in love with and I am increasingly willing to put my money where my mouth is and find a way out.

The reason people want to live here in retirement is: best restaurants, best museums, Broadway and Off Broadway theater, Opera, Ballet, Classical Music, best hospitals, best doctors, all the services you could want, food deliveries, grocery deliveries, laundry and dry cleaning picked up and delivered, and best of all you don't need a car. All of the shopping you need is right out your door. All important criteria as you age.

I'm sure I've left out a few of the benefits that escape me at the moment.

Yes, all of those fun things are great if you are asset rich and income light. Sure if you've got $10mm or $100mm in the bank and are retired or simply inherited it, NYC can be a playground. Even better if you are a real estate investor or developer and have tons of depreciation, then you can have negative income and enjoy all the benefits of NYC ...

I think what folks are angry about in this thread is how high income is taxed, so it's tough for folks to accumulate wealth and get to that point where they can just enjoy.

Yes, RealEstateNY, you have covered many of the great amenities that NYC has to offer. But you failed to mention the extremely high price attached to them. These amenities are not services that we get for free paid from our taxes. And these amenities are not only extremely expensive but are increasing at a pretty fast rate making NYC even more unaffordable with every passing year to anyone but the very wealthy. This is not the city I chose to live in 35 years ago.

You describe a lifestyle that I would consider an Ivory Tower. Soon enough, Manhattan will be completely limited to all but the very rich except for the service people who will open our doors, deliver our food and sell us our opera tickets. Hate to think about what could happen next but that scenario seems inevitable and although some might consider it a utopia, to me its a nightmare and certainly not a place I would want to call home.

Anyway, my main concern is what could happen to the Manhattan real estate market in the next 10-15 years if more and more people like me decide that they are no longer happy or can no longer afford to live in this city.

I appreciate every one’s detailed views about why NYC is expensive when you do not have a need to be here for work. However, would love to hear whether it is new and what changed in the last few years. I can think of nyc property taxes doubling for condo and coops in the last 10 years where as many other places such as Florida may not have gone up. The rest of the tax differential has been more or less the same for ages and people have been moving to Florida. Recent Salt deduction elimination makes a difference of 2 percent at most.

NYC_Sport, is that the trigger for you or you just never thought about where you would live in retirement before and are coming to the same conclusion as people have come for a long time that places like Florida are much cheaper if you do not need to be in nyc for work.

300, what's changed is that the city is increasingly more expensive, housing is increasingly more unaffordable, the population is increasingly much older and there are far more tourists. Also, dramatic increases in absentee property owners, many foreign, makes it all worse, contributing little to the city in terms of additional tax revenues while causing property values to increase even further, to the detriment of young people and couples looking for a startup home not too far from where they work.

Noise levels are higher and street/sidewalk traffic is worse. Living in the city today seems more of an annoyance than a convenience. Maybe if I walk to a store instead of getting delivery or I shovel my own driveway instead of paying a management company to do it for me, I might just loose a few pounds and live a few years longer.

China has their ghost cities and NYC has their see-through buildings. I see nothing positive about these trends which lowers vacancy rates and increases prices.

Although I do not have the data to back this up, I believe what has also changed is the desire of many New Yorkers to leave. Its not just that Florida is cheaper than Manhattan. Its that Florida and other places are increasingly cheaper in comparison. Something as seemingly innocuous as switching one's vacation home and city home (which I am starting to think is a trend), could eventually have a detrimental impact on tax revenues and the city's ability to provide the same level of basic services.

Here is a NYT article that speaks to this problem. No real data behind it so its more of an editorial:

https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apartment-next-door-is-owned-by-an-oligarch.html?_r=0

The following is a very good point:

"Its not just that Florida is cheaper than Manhattan. Its that Florida and other places are increasingly cheaper in comparison."

Essentially cash out of expensive Manhattan and live some where cheaper and have plenty of money left over from your apartment sale. Leaving aside Miami and a few wealthy areas in Florida, everything is still no more than 1/4 of the price of Manhattan if not less.

For the rest of the points, it is debatable as some would think Manhattan is equally or more desirable as it was say 15-20 years back. Young people do not want to live in burbs any more.

https://www.niche.com/places-to-live/search/best-cities-to-retire/

Florida everywhere. Nice condos at most places for $250-$300 per sq ft (except Miami) which is essentially construction cost. 1.25%-1.5% of purchase price in taxes. 50c per sq ft in maintenance with pool etc. For 2000 sq ft condo, pay $750k, $1000 HOA and $10k per year in taxes. Very doable if you do not have a find a job.

My plan is to not retire.

The difference as I see it is that you used to be able to find good but incredibly cheap restaurants, etc. all over Manhattan and those places have been squeezed out by huge increases in retail rents. In the 1980's you could graduate from school with an entry level position at $25,000 and still rent an apartment in Manhattan, go out to dinner several nights a week, have your laundry done for you on a regular basis, etc.
Today that same entry level position at $65,000 you really can't do any of that.

Yeah, all of these inexpensive communities sound great but as someone once said to me, "You have to live there".

As to a "rich and famous" lifestyle, it's not as expensive as you think if you've paid off your mortgage and you live in a good, mid-level doorman building built 50 years ago.

You're not going to broadway shows every week, there are plenty of inexpensive things you can do, like movies, off and off-off broadway shows, museums (sometimes free), less expensive restaurants, etc. Medical costs (Medicare) are basically the same whether you're in the hinterland or Manhattan.

But if you have to live in a trophy building built in the last 20 years with a doorman AND concierge and health club and swimming pool in trendy parts of town with a large mortgage, than yes it will be very expensive.

RENY, I think the main difference is that your capital is locked up as the even the mid-level doorman building coop nice 2 bed room 1500 sq ft is close to $2mm. You can buy a nice 2 bed room condo in Florida for $500k and hopefully earn some returns on the rest of the capital. State/City taxes are the other difference.

That said, "You have to live there" is an important point. Of course, one may view their Manhattan residence as something they want to leave to their children as inheritance as they have plenty of money to pay for their living expenses.

An oversimplification is that minimum additional assets required to retire in NYC is the price difference of home vs different location, where ever and whatever type you would like to live. Taxes are additional.

What used to be a borderline type of calculation.."is it worth doing the 183 day or totally moving out of NYC thing" is now very much in play. If Cuomo thinks he can game this, he is delusional. NYS is no1 in residents leaving. This tax plan will not help.

As a person who first moved to New York City in 1982 and paid $300 a month for a large Loft in the East Village, I fully understand where ximon is coming from. When I sent my children to West Village Nursery School in the 80s it was considered the Hinterlands! There's a lot I miss about New York in the 80s and 90s!

This is also the reason neighborhoods in Brooklyn have become so popular. Brooklyn is much more livable than most of Manhattan, and you can find peace and quiet out there....still. And if you want to stay on the island as I said previously, head up to Inwood or Morningside Heights, it's beautiful.

Miami is absolutely insane, much worse than Manhattan is right now with all the construction and Absolute Total congestion. They just don't have the infrastructure to handle all the people living there now. Flooding after big rains is a very big problem. That said we were just in Brickell and I found it pretty Pleasant and very affordable. And of course Coconut Grove is wonderful though less affordable, I call it the Brooklyn of South Florida.

I own property in Juno Beach and North Palm Beach Florida. If anyone wants to have a real conversation about Florida please feel free to call me.

Keith
TBG

300 mercer: "mid-level doorman building coop nice 2 bed room 1500 sq ft is close to $2mm"

I did a search fo r2 bedroom/2 baths, in Manhattan doorman coops and came up with 35 listings for under $1,250M. Things aren't as expensive as you might think.

Keith, we seem to have a lot in common. I grew up on Staten Island but moved to Manhattan around 1980 when I got a job downtown. I lived on the UWS and paid $300 per month for a tiny studio off Columbus. Not that great an area back then. I made $17,000 per year and felt rich. After rent, utilities, most dinners out and a lot of bar hopping, I still was able to save a little bit of money.

Many people will spend the rest of their lives living in a dense urban environment and feel happy. But I have traveled a bit over the years and no longer think that Manhattan is the center of the world. Besides, if I kept a pied a terre here, I could have my cake and eat it too, spending 3-6 months living in the city but avoiding many/most of the expensive trappings of city living, in particular local taxes and unnecessary housing expenses.

But as to property values, I simply wonder, if I am not the only one thinking of leaving, even part-time, what impact could this have on the market and life in general. Are there enough rich foreigners to replace the New Yorkers who leave? Will Manhattan become a land made up entirely of tourists, oligarchs and sheiks? Can the tax base hold up? Will there be enough young people to replace the old when they pass away? Young people already cannot afford to live in Manhattan and Brooklyn is now their first choice regardless of cost.

As for other locations, a prefer a somewhat cooler climate than Florida and might look for a beach house in the Outer Banks or a lake cabin in Maine. Or buy a house in Portugal or Spain where you can get dual citizenship for a €500,000 purchase. Talk about low taxes, Europe has very low property taxes but high income taxes although there are ways to exempt some of that. And your money can go along way if you avoid living in London, Paris, or the Nordics.

RealEstateNY, I do think that apartments are nearly as expensive as 300 Mercer thinks they are. Take your search and filter that by maintenance and then what results do you have? However, here on the UWS there seems to be a breakpoint around $1.4mm, but I would personally be in the market if you had a 2/2 that was 1500 SF without the maintenance being compensatingly high.

ali r.

They may be smaller than 1500 sq ft and non renovated. $1.25mm $1k per sq ft indeed exist. Comparable probably will be $300-400k in Florida ex Miami with much lower running cost. Still $800-900k difference, which is my main point. It is much more expensive to live in Manhattan than say Florida. If you can afford Manhattan, great but not every one can and it is nothing new.

To your point about reasonable cost properties in Manhattan terms existing, see link below (needs some updates but not a gut). However, maintenance of $5k is a lot more compared to a similar condo in Florida ex Miami which one could get for $700k.

https://streeteasy.com/building/118-east-60-street-new_york/sale/1267516

I am sure it all comes down to individual priorities. I am still fairly young in my mid-30ies but have been spending some time thinking about being on track for retirement etc. I am sure that in retirement I would not want to (1) have a big house that requires lots of maintenance and (2) move to an unfamiliar area where I don't have any friends, family or support network. At least for now, my plan is to "downsize in place". To that end I own a reasonable 1Br (tenant occupied) which will be paid up by the time I retire from rental cashflows and available for use. Housing problem - check. Outside of housing, I lead a fairly modest life and estimate that I could live very comfortably on about 5K per month in expenses, so I'd need about 60K in after-tax money, which is what in that range - about $80K before taxes? So 20K in taxes of which probably only 5K can be saved by moving to a no tax state such as FL. And those savings would likely be eaten up by having to own and maintain a car and flood insurance or what not. I just don't see the rationale. Of course, if you absolutely must retire in a house of such size that generates a 70K tax bill on LI (and I know what that house would look like), your calculus is much different than mine. I don't particularly like or need big houses. In retirement, I would like to enjoy morning walks in central park, my favorite neighborhood coffee shops and restaurants, concerts and shows, and of course all the amenities of city living described above.

Oh, and I think the rumors of NYC being a ghost town populated by tourists and abentee owners is greatly exaggerated. Have any of you folks tried to put a kid in school or even sign up for a swim team here lately? It is madness.

"An oversimplification is that minimum additional assets required to retire in NYC is the price difference of home vs different location, where ever and whatever type you would like to live. '

Yes, 300, perhaps an oversimplification but a valid perspective. Another way to look at it is that the difference in price represents the funds that could be reinvested in something that offers a higher return, in the form of greater happiness or other desire. No asset rich person should feel trapped especially when there are options.

Many vibrant seniors appear to be choosing happiness and are selling their homes, giving much of their wealth to their kids when they could most use it, spending their retirement traveling the world, learning a second or third language or going back to school.

Fancier math of total assets to retire will be rental cost difference (adjusted for lower transportation cost in Manhattan) and tax costs difference per annum between a Manhattan place and say a lower cost retirement place at say 4% annualized. Happiness is priceless.

If it costs you $5k extra per month to live in Manhattan vs Florida, that is $60k per year. Appx $1mm to $1.5mm depending on your number of years of retirement.

One of the reasons, I live in a non doorman building to have low maintenance cost. I am still appx $1.30 per sq ft in a prime area including assessments despite appx 4-5% increase every year.

Have you guys heard of personal defined benefit pension plans?

Pretty much the only way to save that we've found .. given how high taxes are in NYC.

Florida is my idea of hell. I'd rather shoot myself than live in Florida. I'm only 32 so retirement isn't on my radar but if taxes were of concern, I'd simply move back to my native Texas.

Manhattan is very expensive but it's a luxury I gladly pay for.

I recently learned NY State does not tax the first 20k of your retirement income.

Its the little things that make retiring here less and less appealing to me. The ancient subways with no near term solution in sight. The absurd amount of potholes that stay as long as 3 months at a time. Tons of new developments with no added parking. The panhandlers. Crippling union pensions. Franchise gentrification, I look at Dominos pizza and Outback Steakhouse on west 23rd and wince every time.
Just came back from Southern Cal and yeah Cali has its warts (and will cost basically the same taxes wise) but now can see myself retiring there before here.

I agree that many of the things which attracted me to living in Manhattan are no longer here.

I am in RealEstateNY’s camp on this thread, but that may be because we are both in the Midtown East/Sutton/Beekman neighborhood.

I think a big part of the problem with living in NYC is that it offers so much that one does not have to consider other places unless one decides they need a major lifestyle change. Most of us keep playing this game of trading up in housing that offers more of both quality and cost. You can keep playing this game until you are dead or in a nursing home but for me, it may be time to get off this ride and challenge myself with a dramatic change.

Thanks to my investments over these many years, I can live very well in a new challenging environment. Maybe Europe where I can learn a new language and many places are still very affordable. Maybe Mexico or Costa Rica.

Two years ago I bought a vacation home in Ireland where values are now up 20-25%. So one doesn't have to give up that much to make a move out of NYC. Especially if there is no need for a job and few family ties. I really think this is becoming a trend.

If I stay in Manhattan, though, I think I will buy a small pied a terre near Beekman Place, away from the hustle and bustle but with good restaurants and nice areas to walk around. With the leftover funds, maybe buy a small London flat I can use up to 6 months each year.

If you like Beekman Place, something to look forward to or not? https://www.nycedc.com/project/east-midtown-waterfront. One entrance will be right at the Peter Detmold Park. I love the idea of having a greenway on the east side, but not sure how I feel about the potential for increased pedestrian traffic in the otherwise delightfully sleepy neighborhood.

P.S. to East Midtown Waterfront post: I had not checked the status in awhile; it looks like entrance has not yet been decided, but latest analysis suggests 54th street is ahead of 51st street in terms of pros and cons for entrance development.

Great info, multi. I will keep my eyes on this. Thanks. Too bad abut the 51st Street bridge.

I'm late to this conversation, but I wonder too how monthlies factor in? My husband and I moved to Manhattan in our early 50's as empty nesters just a few years ago -- we bought a nice small pre war coop in a full service building on the UES. Our hope would be to keep our place as we get older because it seems to offer services and support for folks as they get older, and is in a great location.
However, leaving aside the disaster of the new tax law, our monthlies are already close to 4000$ and seem to go up 4% a year- - our Board says this is due to union contracts and nothing can be done. As we do the math and think ahead to retirement, what will those monthlies look like in 10 years? 15? Can they really just go up and up and up? By my calculations we would hit a point where we were paying $13,000 a month in maintenance fees for our 1000 square foot coop?!! That seems untenable for almost anyone... Am I missing something? I know that it takes wealth to live in Manhattan, but it seems like it isn't possible to retire here unless one is in the 1% of the 1% with tens of millions in savings. Am I missing something???

Yentle, I do not think you are missing anything except for the possibility that the value of your coop could appreciate and leave you with a decent retirement fund when you and husband are ready. But that would imply that you would be selling your apt. and moving somewhere else. People say "you can't take it with you" which I interpret as encouraging people to take advantage of using one's assets at an optimal time in life rather than waiting for it's twilight.

It's not just apt. living expenses that will likely grow higher than inflation. Taxes, taxi fares, theatre tickets, restaurants, etc. will all be getting more expensive.

When I moved to Manhattan in the early 1980's, Manhattan was affordable to young people earning entry level wages. Today, it's a borough full of the old and the rich and the young are shut out for all practical purposes.

Of course, there are many reasons one might stay here. But for me, I have had more than my share of this city and am looking for new experiences while I can still take advantage of them. Traveling and studying are increasingly important to me. For the price I can get for my condo, I could buy a big house overlooking the ocean in a multitude of European or Central American countries with carrying costs at a fraction of NYC.

Yentel, Having people cater to you in Manhattan is expensive. For a 1000 sq ft coop, you seems to be paying much more than the market. Is it a landlease as it is rare to see more than $2.75 per sq ft in maintenance per month for a full service coop.