I hope you don't take this personally, ExPat, because I intend it in the spirit of debate and not as an
ad hominem attack. ?I feel that there is a lot of misinformation in your post that needs to be addressed.
You're comparing UK living with NZ living. ?I'm comparing US living with NZ living. ?My tax rate is about 20% and my pay would be significantly higher in the US than in NZ.
20% seems very, very low, since the tax rate jumps to 25% at 30K and 28% at 75K for a single filer, and for marrieds it is 25% at 61K and 28% at 124K. ?
FICA also adds approximately 6%. ?Also 43 US states have some form of income tax as well.
If I earn 150k USD in the US, I would need to earn the equivalent of 210k NZD in NZ to be "even" yet when I factor in the tax rates it gets worse:
The proposition that 150K USD=210K NZD is problematic. ?Exchange rates vary, and the exchange rate between the US and NZ has varied considerably (you can check it here:
http://www.oanda.com/convert/fxhistory if you like). ?The exchange rate is also meaningless in terms of saying, "I'd need X amount of money to have Y lifestyle," because the exhange rate is not tied to any real purchasing power in US versus NZ, but rather what some speculators think the currency will be worth. ?That is, even though the US dollar has fallen relative to the NZ dollar, there has not been a corresponding amount of inflation or deflation of consumer prices in either place.
20% US Tax rate on 150k = 30k in taxes. ?40% NZ Tax rate on 210k = 84k. ?I'm simplifying because both rates are actually marginal but it's easier to lay it out this way.
Again, this is a very conservative estimate of US taxes and the worst-case scenario of NZ taxes, and does not include all payroll taxes. ?Furthermore, the comparision is limited because it does not consider total tax burden. ?Property taxes, for example, can be very high in the US (and because they are not directly tied to the payer's ability to pay, are also very regressive.) ?I pay about $250 per month for my 1400 sq ft home on .25 acres.
But the highest paying jobs comparable to the one I have now in NZ only pays about $110k NZD. ? So I would cut my income in half simply to move to NZ then cut it in half again to pay taxes. ?My net income would be 1/4 of what I earn in the US now.
Again, the math is jiggled just enough to make the worst case scenario look even worse. ?Assuming (the incorrect) 40% tax rate, that still leaves 60%, and 1/2 of 60% is 30%, not 25%. ?But, that seems like a quibble in light of the larger issue.
Now let's factor housing. ?I live in a 4 bedroom house in one of the largest cities in the US. ?The current cost for such house is about 200k USD which isn't difficult to pay for with 150k in income. ?But the equivalent house in NZ (Christchurch) would cost about 400k NZD which would be difficult to pay with 100k NZD taxed at 40%!
The median (not average) home price in the US is about $200,000. ?There are many US cities where the media price falls below that (you can find a recent list here:
http://tinyurl.com/2a77ag if you care to). ?However, comparing Indianapolis or Detroit or Buffalo to Christchurch seems unfair. ?Find me a city in the US on the coast within a short drive of the mountains (or similar recreation) or otherwise comparable to ChCh.
I really don't know or understand how people in NZ get by but a few people we spoke to said they lived off of credit cards and most had 50k in debt on credit card.
The average US household has $8K in credit card debt (
http://tinyurl.com/dgrxs) and the personal savings rate in the US dipped below 0% in 2005 and hasn't climbed back out significantly (
http://tinyurl.com/jchc7).
So it seems that if we wanted to move to NZ, the best course of action is to spend the next 10 years earning money in the US and accumulate (10 x 150k = 1.5 million) then pay cash for housing and other expenses down in NZ.
The figure assumes all income would be saved. ?But, yes, if one could save a significant chunk of their income, that would be a sensible plan from a simple financial perspective. ?However, it really is more complicated that that. ?It assumes a status quo of sorts with regard to inflation, exchange rates, taxation, property appreciation, etc. ?
BTW, I do not disagree with the basic premise. ?If my wife and I did not have significant personal savings in our retirement accounts and a good chunk of appreciated value in our house, I don't think we'd do this, unless we were still in our 20's!
Again, this is all dependent on your existing lifestyle and what you are accustomed to. If you've never had something then you won't miss it but if you've had it, you don't want to lose it.
Excellent point!
*I had to edit out some of the OP b/c I was running out of room!*
While NZ medical care may be "free", I only pay $130/month for 90% coverage of all medical expenses. This covers all family members.
That's a really, really good deal, considering that the total cost for most plans exceeds $800 per month. My wife and I pay more than twice your figure for a family of 4.