Calculating Residual Income for Retirement Relocation
John and Maria currently earn a combined $600,000 annually in New York. They are drawn to Florida's lower cost of living and, crucially, its lack of state income tax. However, they're concerned about the impact of a significant lifestyle change and potential decrease in earned income on their ability to maintain their current standard of living and achieve their retirement goals. They're unsure if their existing investments will generate sufficient residual income to compensate for potential lost earnings and cover living expenses in Florida.
Using the Residual Income Calculator, we can project the Petersons' potential residual income from their investment portfolio after relocating to Florida. By inputting their current investment values, projected returns, estimated Florida living expenses, and potential income reduction, we can quantify the excess income their investments will generate. For example, if their investments are projected to yield $100,000 annually and their Florida living expenses are $75,000, the calculator reveals $25,000 in residual income, providing them with a clearer financial picture. Furthermore, the Tax Equivalent Yield calculator helps them compare taxable and tax-exempt investments in the context of their new tax environment.
The Residual Income Calculator uses standard financial formulas to determine excess income after accounting for investment returns and expenses. The Tax Equivalent Yield Calculator determines the yield a taxable investment would need to possess to match the yield of a tax-exempt investment.
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$65,000 in net income increase over the first 5 years by optimizing their investment portfolio after relocation.
