Considering Austin was born out of a vision to help families understand and resolve the negative consequences of living in high-cost, high-tax cities so they can have a secure retirement, build wealth, and enjoy their lives.
High-Cost, High-Tax Cities, A Modern-Day Quagmire
It’s common to hear, We’re working hard but not getting ahead. Or, Everything is so much more expensive than it used to be.
Today, housing and taxes consume upwards of 50-80% of a family’s total income. What’s left is spread too thin across life’s other necessities, leading to harsh trade-offs that negatively affect quality of life and future potential.
Two adverse consequences of insufficient cash flow are 1) underfunded retirement savings and, 2) young people who cannot afford to become homeowners, which impairs their wealth-building journey.
1) An underfunded retirement plan means a risk of depleting resources, leaving retirees vulnerable and dependent. This imperils them, their children, and the community. Old age is tough enough. When older people feel like they are a financial burden, that is a lonely, unempowered place to be. This can be avoided with courage and action in the years before retirement.
2) When young people cannot afford their first (overpriced) house, that leads to disengagement and anger. When several million young people feel this way, society has a problem. And the way social media stokes envy does not help. This too can be overcome with a willingness to explore other options.
The Silent Culprits: Taxes and Housing Costs
What hampers the ability to save or invest? Simply, it’s a lack of disposable income. There are two possible solutions: earn more or spend less. But life is more than money. True wealth is about health, relationships, experiences, and contribution - it's about balance.
When someone lives in a high-cost, high-tax city, earning more usually entails working more. For most, they are already ‘working more.’ Any additional effort comes at the expense of health, relationships, etc.
Three examples: people who live in Coastal California, Chicago, and New York City often pay 36-41% of their gross income in taxes. And housing can consume another 37-43%. Therefore, living in a high-cost, high-tax city may leave as little as 16-27% of total income for food, clothing, utilities, medical, childcare, education, transportation, etc.
It is no wonder those families are behind on saving for retirement and/or investing to build wealth. And they’re probably worn out too.
Trade-offs of Living in High-Cost, High-Tax Cities
When taxes and housing consume too much of the total monthly income, families must choose between:
- Establishing an adequate emergency fund
- Saving for a house purchase
- Funding children’s needs, from braces, a first car, college, and a desire to help them buy their first home
- Maximizing contributions to retirement accounts: 401(k), 457(b), Roth and Traditional IRAs
- Supporting elderly parents
- Affording vacations and creating memories
The Domino Effect of Underfunded Retirement
The consequences of an underfunded retirement are tough:
- Retirees face stark choices impacting their quality of life and well-being, from health care decisions to combating loneliness and finding purpose.
- Financial dependence in old age strains family relations and jeopardizes financial stability of future generations.
Bankrate’s 2023 study reveals that 57% of Americans lack enough emergency savings to cover a $1,000 unforeseen expense. The Federal Reserve Bank found 35% of bankruptcies could have been prevented with a mere $5,000 in savings. In retirement, people often do not have the wherewithal or time to recover.
The Retirement Savings Gap
A 2022 Federal Reserve Survey of Consumer Finances illuminates the stark realities of retirement savings across various age groups, forecasting significant shortfalls that amplify with age. For example, those between the ages of 50-60 are behind on their retirement savings by $400,000 and those age 60-70 are short over $550,000. That does not account for inflation.
Building Wealth Requires Leverage and Time
Investment in real estate has traditionally been the middle-class path to wealth accumulation. Even the ultra-wealthy position over 30% of their wealth in primary and secondary homes.
At a 7.2% rate of return, money doubles in ten years. The later people start acquiring assets, the fewer ‘doubles’ they get. It is important to start young.
The normal chronology of adulthood and building wealth follows this arc:
- Graduate and get a job (20s)
- Buy a house (20s)
- Start a family (early 30s)
- Save for retirement (30s)
- Invest to build wealth (40s - 50s)
- Retire (60s)
- Legacy (80s)
For forty years college costs have increased at 3x the general inflation rate. Inflated tuition costs and student loan payments now delay step two (buying a house) because young graduates cannot qualify for a purchase mortgage loan.
Today, many young people are not buying their first house until their mid-thirties, and they have child expenses into their late fifties. This delays saving in earnest for retirement and often results in only getting one ‘double’ on those assets before they retire.
When someone cannot save enough for retirement, there is little chance they can amass enough non-qualifed (non-retirement) assets to build wealth.
Are there exceptions? Of course. But Considering Austin was designed to help anyone who wants a better, more secure future.
Einstein said, “We cannot solve our problems with the same thinking we used when we created them.” Relocating is often a new way of thinking about lowering expenses, including and especially tax expenses while still working.
Some clients relocate to a nicer house and their state income tax savings alone more than covers their entire housing costs. Business owners save even more.
The Danger of Starting Late
The real danger of living in a high-cost, high-tax state is that everything gets delayed: buying the first house, adequately saving for retirement, investing to build wealth. Each step is delayed by ten-plus years, which negates the magic of compounding.
A simple example. Invested $10,000 per year, account grew at 7%.
- Family 1: started at age 25, by age 65, account grew to $4.3 million
- Family 2: started at age 45, by age 65, account grew to $409,000
The difference is $3.9 million!
Worse, think about the person who lived in the high-cost, high-tax city until age 65. They could not afford to invest $10,000 per year thus their investment account is zero and they have no income-producing assets.
While that sounds unimaginable, a 2022 Federal Reserve Study found only 27% of Americans have over $50,000 in non-retirement accounts and less than 6.7% own rental property.
Relocating – Not Just for the Middle Class
Relocating out of high-cost, high-tax cities is not just for those with underfunded retirements or young people struggling to buy their first house. In 2021, Elon Musk relocated from Los Angeles to Austin, citing lower taxes as one reason. And this month, Jeff Bezos announced he was leaving the West Coast for Florida – another state with no state income taxes.
The most frequent objection Considering Austin gets is around relocating and leaving behind what’s familiar. Read what Jeff Bezos wrote about leaving:
“Seattle has been my home since 1994. I’ve lived in Seattle longer than I’ve lived anywhere else and have so many memories here. As exciting as the move is, it’s an emotional decision for me. Seattle, you will always have a piece of my heart.”
Relocating is not just for the people who ‘could not make it.’ When the richest and third richest person in the world relocate to another state, there must be something to it.
How Considering Austin Makes a Difference
Considering Austin’s unique six-step process embraces all aspects of understanding and resolving the negative consequences of living in high-cost, high-tax cities. All aspects includes finances, negotiations, logistics, and emotions. The six steps include:
- Life Inventory
- Financial Clarity
- Relocation Priorities
- Discovery Trip
- Buy or Build
- Sell, Move, Thrive
Being smart with money is a good idea, no matter who you are. But it’s more than numbers. People are emotional beings that use data to validate their decisions. Relocating is for people who don’t want to settle for being happy with less. They’re optimistic about the future and are willing to get outside their comfort zone to have the life they want in a balanced, sustainable way.
Our job is not to talk someone into moving to Austin. Relocating is not always the best decision - every family is different. Sometimes relocating is the best move and sometimes Austin is a family's best option. We are agnostic on both of those points.
The purpose of Considering Austin is to help people make their own informed decisions and efficiently execute a well-designed plan in a way that feels like a grand adventure. Success is when our clients have confidence that they are on a sustainable path to prosper financially, physically, relationally, and spiritually. That's what we want to help people do... one family at a time.
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