Greetings !
As a follow up to the last blog post, something that we might want to take a look at as we get closer to our retirement years are the states that are friendliest for retirement. It can make a very big difference in how much money is left in your pocket and when we are no longer working and bringing in a regular paycheck, it can mean all the difference in the world. So, let’s take a look at some of the most desirable locations to retire in alphabetical order, at least from a financial standpoint. In general, most states do not tax your Social Security benefits.
Neither Alaska or Florida have an income tax. They also do not tax your 401K, IRA, or pensions and they do not have an estate or inheritance tax. There is no Social Security tax.
Illinois does not tax your 401K or pension as long as they are part of an employee benefit plan. Social Security is tax exempt. Illinois does however have an estate tax if your estate is worth at least four million dollars.
Mississippi doesn’t tax Social Security and they don’t have estate or inheritance taxes. Your 401K, pension, and IRA are safe too as long as you don’t retire before 59 ½ years old. Income taxes range between 3% -5%.
Nevada is totally free. No 401K, IRA, or pension tax. They have no income tax, estate or inheritance tax, and your Social Security is yours to keep. There is no gamble here.
New Hampshire is a mixed bag. They do not take your 401K, IRA, or pension income and they do not have a general income tax. They also do not tax your Social Security money and there is no inheritance or estate tax either. They do however tax interest and dividends on your investments at a flat rate of 5%. Property taxes can be high here depending on the county you decide to reside in, so do your homework.
Pennsylvania is also a mixed bag. They don’t tax your IRA or 401K unless you retire early. Your pension is safe too as long as it is with an employer sponsored retirement plan and you do not retire early. Pennsylvania does have both an estate and inheritance tax which can range from 4.5% to as high as 15%. The state income tax comes in at just over 3% but local areas can also tax you, so do your homework before deciding on a spot.
South Dakota like Nevada is totally free. No Social Security tax, no 401K, IRA, or pension taxes, no estate or inheritance tax and no income tax.
Tennessee doesn’t collect taxes on your 401K, IRA, or pension. They do not tax Social Security and they do not have estate or inheritance taxes. They do have a limited income tax on interest and dividends, but this appears to be being phased out.
Texas is another bargain as it is totally free. No Social Security tax, no taxes on your 401K, IRA, or pension funds. They do not have an income tax, nor is there an estate or inheritance tax. Giddy up.
Washington is a mixed bag. While your 401K, IRA, Social Security, and pension is safe, and they have no income tax to get you, they do have an estate tax if your estate has a value a bit over two million dollars. There is no inheritance tax.
So, there you have it. Whether you want to go north, south, east, west, or in between there is a tax friendly place for you to retire to. There are places to go if you like the great outdoors and enjoy winters or places to go if you prefer warmer climates, water, or other activities. As with all financial decisions, do your homework. Look at the cost of living – housing, food, entertainment, activities that you would enjoy, etc.
Today is a new day. Onward and upward!