Here’s the picture: In 1995, as an ambitious college graduate from a top business school you trek off to the Big Apple to make your fortune. After saving your bonuses for a year you find a simple starter home in the Queens borough of NYC. It cost you $276,000.
You settle down, build a modest but comfortable career. Your wife chooses to stay home and be the primary care giver to your 2 children. You save some money for retirement and focus on building stability for your family and maybe even a little left over for your kids to inherit someday. Flash forward to 2026 and you are putting the final touches on your retirement plans.
You have accumulated about $1.5 million in your company 401K by making regular payroll deposits and receiving your company employer matching contributions for 30 years. You stayed put in your house and didn’t succumb to chasing the bigger, sexier places that your peers pursued as your income grew over time. In fact, you just celebrated with your wife as you make your final mortgage payment. You marvel that the home you bought in 1996 is now worth around $1.1 million dollars. This makes you wince slightly because the modest starter home that you maintained regularly is now considered a mansion for sales tax purposes in NYC. This means when you sell it someday, the buyer will have to pay an additional 1% on the entire value of the home upon closing.
Your biggest retirement living expense will be property taxes on your home. In Queens, this runs about 6% of your homes value. That means even though your house is paid for you will need about $60,000 a year to pay your property taxes. That’s twice what most Americans pay in property taxes but you’ve built a life in your community for the last 30 years.
In 2011 after the Great Financial Crisis, you bought an inexpensive vacation place in central Florida with the plan to spend the harshest winter months there instead of New York. The 2-bedroom condo cost you $135,000 with modest HOA fees and property taxes. It appreciated about 2% a year and now it’s worth about $180,000. Your property taxes on it are only $1,400 a year. The same place in Queens would cost $10,000 in property taxes a year. You’ve heard the news that the State of Florida is seriously debating the elimination of property taxes. While nice, you still have a tight bond to your Queens community.
Here’s where your financial picture stands:
- Primary residence in Queens $1,100,000
- 401k retirement plan $1,500,000
- Miscellaneous assets $500,000
- Condo in Orlando $180,000
- Total estate $3,280,000
Along comes your newly elected mayor, Zohran Mamdami with promises to fix New Yorks gaping $5.4 billion budget deficit. His plan includes tax increases on rich folks and as a new retiree, surely you won’t fall into that definition when the dust settles and the proposals become law.
Then you read that Mamdami wants to reduce the estate tax exemption from 7.1 million all the way down to $750,000. The top estate tax rate is 16% but he wants it raised to 50% of people’s estates.
When you and your wife leave this world, the state of New York will ask your children to hand over a very large portion of your accumulated assets ($800,000 or more depending on what’s enacted). You finally reach the pain point where you must flee the confiscatory policies of your new socialist mayor. You look at your wife and tell her, “Maybe we need more vitamin D from the Sunshine state anyways.”
