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About 25.6 million Americans made a move in 2023, which amounts to 7.8% of the country’s population. As you may be aware, a move can be expensive. Current estimates reveal that a local move for the contents of a three-bedroom home costs approximately $2,200, while a long-distance move is easily twice that. What’s more, amid the chaos of purging and packing, it’s easy to forget some of the moving-related costs you might face.

To help you get organized and budget appropriately, read on for the full story.

Understanding Moving Expenses

While it may not be as fun as, say, budgeting for a wedding, figuring out costs for moving can be similarly complex. There can be numerous aspects to wrangle, from purchasing the proper packing supplies, to deciding whether to DIY your move or hire professionals, to understanding insurance needs. Consider the following.

Types of Moving Expenses

Here are some of the costs you are likely to incur when moving:

•  Transportation, or actually moving your possessions from point A to point B

•  Moving services, meaning having professionals load, transport, and unload your belongings

•  Packing, which usually involves cartons and bubble wrap (or you might pay to have movers pack delicate or valuable items)

•  Insurance to cover the value of your belongings as they are transported

•  Rent and security deposits. The location you’re moving to may require a security deposit and first month’s rent in advance.

•  Cleaning fees. You may have to pay to have your former and new residences cleaned.

•  Lodging. As you travel from your former home to your new place, you may have to stay a number of nights in a hotel or motel. Some people need to bridge the gap between homes with a short-term rental as well.

•  Storage. You might have to put some items in storage, depending on the timing and specifics of your move.

•  New furniture and appliances. Often, when people move, they discover they need to buy new pieces, whether that means window shades, a fridge, rugs, or a dining table.

Factors That Affect Moving Costs

There are numerous variables when you move, but here are a few key ones to consider:

•  How far you are moving. A move across town will involve less time, effort, and expense than a move across the country (or overseas).

•  How much you are moving. If you are a recent college graduate with just a few pieces of furniture, your move is likely to cost less than, say, a family of four packing up their whole home (basement and attic including) and relocating.

•  Time of year. Summer tends to be the busy season, with students leaving school and finding new places to settle and families wanting to get to their new house before the school year starts. This increased demand can increase prices.

•  Services needed. If you are going to pack the contents of your studio apartment and have a friend with a van to help you move, you’ll likely spend considerably less than you will if you are a family of four who wants movers to pack and transport all your furniture and other items.

•  Storage. If you have to store all your possessions for a couple of weeks before you can have access to your new place, those costs can add up.

•  Access to locations. Someone whose move involves a single-level home with an ample driveway will likely have a shorter move than someone who lives in a 20th-floor apartment on a crowded city block. And shorter moves are less expensive than longer ones.

How to Create a Moving Budget

Once you know when and where you are moving, you can map out a moving budget.

•  Take inventory of what you want to move. Consider clothes, contents of your kitchen and bathroom(s), items stored in closets, and belongings in the attic, basement, and garage, if applicable. This will help you determine how big a truck you need and how much packing material you need.

•  Unless you’re planning to DIY your move, get multiple quotes from movers and carefully check reviews for the key contenders.

•  Don’t forget to add in line items such as packing materials, insurance, storage, and your daily expenses as you move.

•  Assess transportation and lodging costs as you move, plus pet boarding expenses, if needed.

•  Calculate the costs of getting settled in your new home: Rent, security deposit, new furnishings, cleaning fees, and so forth.

Once you have all the potential costs tallied, you can consider how to allocate funds to cover these expenses. Since moving costs can add up, you might want to think about ways to avoid putting the charges on a high-interest credit card.

Cost of Hiring Professional Movers

Next, take a closer look at one of the biggest expenses of moving: the cost of hiring a professional team to get you to your new home.

Average Cost of Hiring Movers

As you might guess, the cost of hiring movers can range widely depending on location, distance of the move, and how much you’re moving. Here are some general figures to be aware of:

•  For a local move (meaning 100 miles or less), costs typically range from $800 to $2,500.

•  For a long-distance move (more than 100 miles), costs are usually considerably higher, ranging from $2,200 to $5,700.

There can be additional fees to consider: extra insurance for valuable items, the cost of packing and moving supplies, the fee for professional packing of items, and special services for moving items like, say, a piano or a pool table. You may also want to calculate how much tipping your movers might cost; omitting that expense could be a budgeting mistake. Recommendations typically say between 10% and 20% of the cost of your move is appropriate.

Recommended: Personal Loan vs Credit Card: What’s the Better Option?

Tips for Saving Money on Professional Movers

As you contemplate moving and how much it will cost, you may want to try various ways to keep the price down:

•  Declutter before your move. The less stuff you have, the less packing materials you’ll need and the faster (and cheaper) your move will be.

•  Pack what you can. While valuable art or a prized guitar may not be good candidates for packing yourself, you can likely save money by packing, say, your clothes in your suitcases and duffel bags vs. paying a professional to do the job.

•  Move during the off-season. There’s less demand during seasons other than summer, so you might get a better deal.

While of course you want to stick to your budget, keep in mind that the cheapest quote for moving may not be the best option. A moving company’s reputation for safe, on-time services can matter more than a rock-bottom price.

DIY Moving: Budgeting and Expenses

Thinking of doing your own move? Consider these aspects:

•  The cost of renting a truck or van will require funding. As you might guess, the bigger the truck and the longer you use it, the more costly it will be. According to Angi.com, renting a truck can cost between $20 and $100 a day for a local move, but a long-distance move can incur charges of $300 to $2,000 or more a day. The average cost in the U.S. is about $1,000. (Keep in mind that you need to resolve what happens to a truck that you might drive cross-country to move. Can you drop it off at a location near your new home, or will you have to pay a fee for its return to its home base?

•  You’ll also need to budget for packing materials. Online packing calculators can help you determine your needs and the cost, but estimates say that for a small-to-medium home (a two-bedroom apartment or house), you’ll likely need to spend at least a couple hundred dollars on cartons, not including such supplies as bubble wrap ($2 for 10 feet) and tape ($2.50 and up per roll). Don’t forget some sturdy markers to help you label what’s inside each box.

•  You might rent reusable boxes (typically plastic ones) to use for your move. Another item that can be wise to rent is wardrobe boxes, which allow you to move clothing that’s hanging in your closet into these boxes for easy transportation.

•  Moving blankets are another expense. These can cost $10 and up a pop if you purchase them. You may be able to rent them from a moving company to use for your DIY move.

•  Don’t forget about dollies and hand trucks to get boxes from one location to another.

Recommended: Personal Loan Calculator

Hidden Moving Costs to Be Aware Of

As you get ready to move, don’t overlook these costs (some of which were mentioned above):

•  Storage costs for any items that need to be held securely before they can be moved into your new home. You might easily pay between $100 and $300 a month for this service. You also might need to pay insurance fees to protect your items.

•  Any temporary housing you may need

•  Transportation costs. You may be in a situation in which you fly cross-country but need to ship your car (the average cost of shipping a car is $1,650). Or maybe you’ll drive, triggering gas, lodging, and road food costs.

•  If you’re moving to a different state and have a car, you’ll need to apply for a new license and register your car with the local DMV, which can wind up costing a couple hundred dollars. That’s another item to add to your moving expenses checklist.

•  You will likely need to update documents and do a significant amount of address changing for all your online and other accounts. You might face some delays in receiving payments (such as passive income), so that is worth considering in advance as well.

•  Security deposit and first month’s rent, if applicable, at your new place. Also utilities setup and any transfer fees; locks and smoke and carbon monoxide detectors

•  Stocking your kitchen at your new home (pantry and grocery expenses are not insignificant)

Tips for Reducing Moving Expenses

Here are some ways you can bring down your moving costs (some were already referenced above):

•  Downsize as much as you can before moving. The less you have, the faster and cheaper your move can be.

•  Find affordable or free moving materials. Options can include getting free cartons and other supplies from friends and family, sourcing boxes from local retailers, or renting things like plastic containers, wardrobes, and moving blankets vs. purchasing them.

•  Schedule your move appropriately, avoiding the busy and pricey summer high season.

•  Check the Internal Revenue Service’s allowable tax deductions and reimbursements for moving. The IRS website shares details of what you might qualify for.

Planning for Additional Moving Expenses

Part of the goal of this planning is to help you avoid putting many of these potential charges on your credit card, since they typically charge high interest rates. Maybe you can dip into funds held on reserve: That’s what emergency savings are for.

You can also use a 0% interest credit card, crowdsource from friends and family, or consider a personal loan.

Personal loans are a form of installment debt, where you receive a lump sum that you then repay in equal monthly payments. There are different types of personal loans, so you can choose the terms that best fit your budget and circumstances.

Believe it or not, moving expenses are one of the most common uses for personal loans. And because of their relatively low fixed rates compared to high-interest credit cards, you can roll in related new-home expenses like new furniture and painting.

Recommended: Get Your Personal Loan Approved

The Takeaway

Moving is a major financial commitment, but it doesn’t have to break the bank. When planning a move, first decide whether you’re going to DIY or hire pros. Then make a list of other expenses: packing supplies, funds for a security deposit at your new place, and new furniture and household items. You may need to tap your savings or take out a personal loan to afford these charges.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

What are the typical costs associated with moving?

A local move (meaning less than 100 miles) can cost from $800 to $2,500, while a long-distance move can cost a couple of thousand dollars and up. Costs include professional movers or truck rental, packing supplies, transportation to your new location, possibly lodging, and costs such as a security deposit and new vehicle registration at your new home.

What is a reasonable amount for moving expenses?

There is no one figure that’s reasonable for moving expenses. The amount of possessions you need to move, how far you are moving, and when you are moving are among the factors that matter. It can also impact costs if you hire professional movers vs. doing it yourself. In general, a move can easily cost at least one or two thousand.

What are ways to lower the cost of moving?

To lower the cost of moving, you might do the move yourself with friends and family, source free boxes from local retailers, and declutter before you move, not after.

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SOPL-Q424-053

Want to contribute to a Roth IRA, but have an income that exceeds the limits? There’s another option. It’s called a backdoor Roth IRA, and it’s a way of converting funds from a traditional IRA to a Roth.

A Roth IRA is an individual retirement account that may provide investors with a tax-free income once they reach retirement. With a Roth IRA, investors save after-tax dollars, and their money generally grows tax-free. Roth IRAs also provide additional flexibility for withdrawals — once the account has been open for five years, contributions can generally be withdrawn without penalty.

But there’s a catch: Investors can only contribute to a Roth IRA if their income falls below a specific limit. If your income is too high for a Roth, you may want to consider a backdoor Roth IRA.

What Is a Backdoor Roth IRA?

If you aren’t eligible to contribute to a Roth IRA outright because you make too much, you can do so through a technique called a “backdoor Roth IRA.” This strategy involves contributing money to a traditional IRA and then converting it to a Roth IRA.

The government allows individuals to do this as long as, when they convert the account, they pay income tax on any contributions they previously deducted and any profits made. Unlike a standard Roth IRA, there is no income limit for doing the Roth conversion, nor is there a ceiling to how much can be converted.

💡 Quick Tip: How much does it cost to open an IRA account? Often there are no fees to open an IRA, but you typically pay investment costs for the securities in your portfolio.

How Does a Backdoor IRA Work?

This is how a backdoor IRA typically works: An individual opens a traditional IRA and makes non-deductible contributions. They then convert the account into a Roth IRA. The strategy is generally most helpful to those who earn a higher salary and are otherwise ineligible to contribute to a Roth IRA.

Example Scenario

For instance, let’s say a 34-year-old individual wants to open a Roth IRA. Their tax-filing status is single and they earn $165,000 per year. Their income is too high for them to be eligible for a Roth directly (more on this below), but they can use the “backdoor IRA” strategy. In order to do this, the individual would open a traditional IRA and contribute non-deductible funds to it. They then convert that money to a Roth IRA.

Recommended: Traditional Roth vs. Roth IRA: How to Choose the Right Plan

Income and Contribution Limits

In general, Roth IRAs have income limits. In 2024, a single person whose modified adjusted gross income (MAGI) is more than $161,000, or a married couple filing jointly with a MAGI more than $240,000, cannot contribute to a Roth IRA. For tax year 2025, a single filer whose MAGI is more than $165,000, or a married couple filing jointly with a MAGI over $246,000, cannot contribute to a Roth IRA.

There are also annual contribution limits for Roth IRAs. For tax years 2024 and 2025, the annual contribution limit for traditional and Roth IRAs is $7,000. These IRAs allow for a catch-up contribution of up to $1,000 per year if you’re 50 or older. Traditional IRAs have the same contribution limits as Roth IRAs.

How to Set Up and Execute a Backdoor Roth

Here’s how to initiate and complete a backdoor Roth IRA.

•   Open a Traditional IRA. You could do this with SoFi Invest^®, for instance.

•   Make a non-deductible contribution to the Traditional IRA.

•   Open a Roth IRA, complete any paperwork that may be required for the conversion, and transfer the money into the Roth IRA.

Tax Impact of a Backdoor Roth

If you made non-deductible contributions to a traditional IRA that you then converted to a Roth IRA, you won’t owe taxes on the money because you’ve already paid taxes on it. However, if you made deductible contributions, you will need to pay taxes on the funds.

In addition, if some time elapsed between contributing to the traditional IRA and converting the money to a Roth IRA, and the contribution earned a profit, you will owe taxes on those earnings.

You might also owe state taxes on a Roth IRA conversion. Be sure to check the tax rules in your area.

Another thing to be aware of: A conversion can also move people into a higher tax bracket, so individuals may consider waiting to do a conversion when their income is lower than usual.

And finally, if an investor already has traditional IRAs, it may create a situation where the tax consequences outweigh the benefits. If an individual has money deducted in any IRA account, including SEP or SIMPLE IRAs, the government will assume a Roth conversion represents a portion or ratio of all the balances. For example, say the individual contributed $5,000 to an IRA that didn’t deduct and another $5,000 to an account that did deduct. If they converted $5,000 to a Roth IRA, the government would consider half of that conversion, or $2,500, taxable.

The tax rules involved with converting an IRA can be complicated. You may want to consult a tax professional.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Is a Backdoor Roth Right for Me?

It depends on your situation. Below are some of the benefits and downsides to a backdoor Roth IRA to help you determine if this strategy might be a good option for you.

Benefits

High earners who don’t qualify to contribute under current Roth IRA rules may opt for a backdoor Roth IRA.

As with a typical Roth IRA, a backdoor Roth may also be a good option when an investor expects their taxes to be lower now than in retirement. Investors who hope to avoid required minimum distributions (RMDs) when they reach age 73 might also consider doing a backdoor Roth.

Downsides

If an individual is eligible to contribute to a Roth IRA, it won’t make sense for them to do a backdoor conversion.

And because a conversion can also move people into a higher tax bracket, you may consider waiting to do a conversion in a year when your income is lower than usual.

For those individuals who already have traditional IRAs, the tax consequences of a backdoor Roth IRA might outweigh the benefits.

Finally, if you plan to use the converted funds within five years, a backdoor Roth may not be the best option. That’s because withdrawals before five years are subject to income tax and a 10% penalty.

Is a Backdoor Roth Still Allowed in 2024 or 2025?

Backdoor Roth conversions are still allowed for tax years 2024 and 2025.

There had been some discussion in previous years of possibly eliminating the backdoor Roth strategy, but this has not happened as yet.

The Takeaway

A backdoor Roth IRA may be worth considering if tax-free income during retirement is part of an investor’s financial plan, and the individual earns too much to contribute directly to a Roth.

In general, Roth IRAs may be a good option for younger investors who have low tax rates and people with a high income looking to reduce tax bills in retirement.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

What are the rules of a backdoor Roth IRA?

The rules of a backdoor Roth IRA include paying taxes on any deductible contributions you make; paying any other taxes you may owe for the conversion, such as state taxes; and waiting five years before withdrawing any earnings from the Roth IRA to avoid paying a penalty.

Is it worth it to do a backdoor Roth IRA?

It depends on your specific situation. A backdoor Roth IRA may be beneficial if you earn too much to contribute to a Roth IRA. It may also be advantageous for those who expect to be in a higher tax bracket in retirement.

What is the 5-year rule for backdoor Roth IRA?

According to the 5-year rule, if you withdraw money from a Roth IRA before the account has been open for at least five years, you are typically subject to a 10% tax on those funds. The five year period begins in the tax year in which you made the backdoor Roth conversion. There are some possible exceptions to this rule, however, including being 59 ½ or older or disabled.

Do you get taxed twice on backdoor Roth?

No. You pay taxes once on a backdoor IRA — when you convert a traditional IRA with deductible contributions and any earnings to a Roth. When you withdraw money from your Roth in retirement, the withdrawals are tax-free because you’ve already paid the taxes.

Can you avoid taxes on a Roth backdoor?

There is no way to avoid paying taxes on a Roth backdoor. However, you may be able to reduce the amount of tax you owe by doing the conversion in a year in which your income is lower.

Can you convert more than $6,000 in a backdoor Roth?

There is no limit to the amount you can convert in a backdoor Roth IRA. The annual contribution limits for IRAs does not apply to conversions. But you may want to split your conversions over several years to help reduce your tax liability.

What time of year should you do a backdoor Roth?

There is no time limit on when you can do a backdoor Roth IRA. However, if you do a backdoor Roth earlier in the year, it could give you more time to come up with any money you need to pay in taxes.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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