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This is where young and rich Americans are moving

California and New York recorded the maximum number of departures of high-earning millennials.

Even after the migrations, New York and California are still home to the highest number of young high earners in America. David L. Ryan/Globe Staff

By Nirav Shah

October 24, 2023

3 minutes to read

(Wealth of Geeks) – All American cities have experienced a significant rise in living costs after the COVID-19 pandemic. Making things worse, with a potential recession on the horizon, many Americans are highly apprehensive about their financial security.

Surprisingly, many young and wealthy Americans also suffer from this insecurity. The rising costs have made them more cautious about their expenses. Many young and rich Americans have moved to cities with a lower cost of living to make ends meet and protect their ability to save.

SmartAsset, a financial advisory firm, recently published a report ranking the states in America based on their net migration. This report specifically looked at 25- to 36-year-old Americans who earned more than $200,000, per 2021 Internal Revenue Service figures.

According to this report, Florida, Texas, and New Jersey are the most preferred migration destinations for these deep-pocketed millennials. Most newcomers relocated to large metro areas such as Jersey City, Miami, and Austin. Some other popular destinations among this group included Colorado, Connecticut, and North Carolina.

Some key takeaways from the survey:

— While the maximum inflow of high earners was in Florida and Texas, California and New York recorded the maximum number of departures. After considering both inflows and outflows, Florida and Texas gained a total of 2.175 and 1,909 high-earners, respectively.

— Even after the migrations, New York and California are still home to the highest number of young high earners in America.

–In general, 2,617 high-earning tax filers left New Jersey in 2021. However, in the same year, 1,048 new affluent young professionals flocked to it. The trend seen in Connecticut was similar.

–Out of all American states, the number of young rich people is highest in California. In this state, more than 13% of all people earning more than $200,000 per year belong to the age group of 26 to 35 years.

Why are they moving?

Many experts believe that there are several reasons why Florida and Texas are top choices among young and wealthy people planning to move. With zero income tax, these states are ideal for young earners who want to focus on saving more and boosting their retirement accounts. Also, the unemployment rate in Florida is 2.7%, significantly below the national average of 3.5%.

When it comes to Texas, Austin and Miami are quickly emerging as tech hot spots, attracting young professionals with exceptional and niche skills looking to develop their careers. According to a study by the Commerce Department’s Bureau of Economic Analysis in 2022, Texas’s average cost of living was just over $45,000 — $8,000 less than California’s and New York’s.

The warm weather in Florida and Texas is also a selling point.

On the other hand, New Jersey is an excellent option to live a suburban lifestyle and save money while enjoying the proximity of New York and its social, career, and entertainment opportunities. The graduated income tax structure of the state means an increase in tax rates along with income. However, many young and wealthy New Yorkers have decided to move across the Hudson River because of the cost of housing. According to Zillow, compared with $3,750 in New York City, Jersey City had a median monthly rent of $2,700 in late August. Many young families also prefer living in New Jersey because of its competitive public school system.

Quest for financial independence

Financial independence is undoubtedly the top priority for young, wealthy Americans moving to other states. Interestingly, today’s youth have an entirely different outlook about their future than past generations. A high percentage of this generation is interested in something other than working for others. Staring their own business is the foremost goal for many of them.

A recent survey conducted by Wakefield Research indicated that 60% of today’s teenagers want to start a business someday instead of working in a traditional job. For approximately 40% of respondents, this ambition was influenced heavily by celebrities and social media influencers.

The ultimate goal: Achieving ‘FatFIRE’

“FatFIRE” is one of the most effective ways to achieve lifelong financial independence. Unlike traditional FIRE (Financial Independence, Retire Early), which requires living stingy and following a frugal lifestyle, FatFIRE is more about enjoying a more luxurious lifestyle despite retiring early. By embracing this unique approach to early retirement, many people have maintained or even improved their pre-retirement lifestyle.

Followers of traditional FIRE try to build up sufficient assets for their future by minimizing expenses and maximizing savings. On the other hand, the objective of FatFIRE is to match or exceed the pre-retirement lifestyle by building up sufficient assets. In case of unexpected expenses, retirement can be at risk for those following traditional FIRE. However, FatFIRE followers can remain retired because of their cushion of assets.

It is important to remember that pursuing FatFIRE requires individuals to save significantly more after their regular lifestyle expenses. Naturally, this option is suitable only for high-income people and business owners. The recent trend suggests that young and wealthy Americans are moving to cheaper states and are well-placed to embrace this lifestyle movement.

This article was produced by Media Decision and syndicated by Wealth of Geeks.

This is where young and rich Americans are moving