The kids are gone, the house is paid for, and you never have to work another day again.
How do you decide where to spend the next phase of your life?
Finding the best place to call home after you’ve lived and worked all your life to get to this point can be daunting. There are many states across the nation to consider, but only if you know what to look for. In years past, you may’ve been tied to a particular location because of employment or family obligations. Now that you’re retired however, you may no longer be limited to a particular area of the country.
While many retirees will still choose to live close to family members, there is a great deal to consider when making the choice to relocate. For most of us, retirement means living on a fixed income. Because we will no longer be getting raises and promotions, we need to find a way to live comfortably within our post-retirement means.
Retirees should consider these 13 things, before they opt to relocate.
1. Location of Family Members—Living near loved ones is a top priority for many people. Now that they are no longer tied to employment, some opt to move closer to family.
2. Cost of Living—Many people will not be able to maintain their current lifestyle once they retire. The difference in the cost of food, gas, insurance, and utilities differs tremendously between states.
3. Retirement Income Tax—While taxed Social Security income may not amount to very much, other pension accounts could be seriously impacted. In 2018 a retired couple will receive on average, a little over $2340 per month from Social Security benefits. While taxes on this amount may not break the bank, some states apply rates more heavily than others on pensions and retirement accounts.
4. Military or Government Pension Tax—These may be taxed differently than 401k’s, IRA’s or other traditional company pensions as well. Mandatory distributions of retirement payments and the state’s requirements for taxation of these differ greatly in the U.S.
5. Real Estate Tax—Some states tax property more heavily than others based on home values. While retirees no longer have children in the public school system or use many of the programs designed to help families, they may still pay high amounts proportionate to their income.
6. Inheritance Tax And Estate Tax—States may tax heavily on estates. This can hamper future plans for retirees who wish to hold onto assets and pass them onto heirs later.
7. Climate—After shoveling snow and living in colder climates many flock to warmer states.
8. Medical Care—This is a big factor when considering where to retire. Proximity to good medical facilities and physicians is key for people at this time in their lives.
9. Crime Rates—Safety and security are important for everyone and retirees will take this into consideration when choosing where to live.
10. Transportation—Accessibility to train and bus lines may be a factor for some who don’t intend to drive as much as they once did.
11. Recreational Opportunities—Once retired many people look to get involved with others in the community who enjoy the same things.
12. Natural Disasters—Winter storms, earthquakes, tornadoes and hurricanes may have many retirees looking to relocate to calmer areas.
13. Affordable Available Housing—Cost of housing is a deciding factor on relocation after retirement. Lower rents and home prices drive some to Midwestern and Southern states.
Based on property tax rates, taxation of retirement income, and cost of living, these 10 states are ranked the worst states for retirees in the U.S.
10 Worst U.S. States for Retirement – Pros and Cons *CONTINUE USING NAVIGATION BUTTONS BELOW!*
1. NEW JERSEY
High property taxes and the taxation of pensions, makes New Jersey an expensive place to retire. On incomes over $500,00, a high marginal tax rate of 8.97% is applied and the cost of living ranks 41 out of 51 for U.S. states.
Military pensions and Social Security benefits are not taxed and New Jersey boasts some great beaches along its coast.
The state of Illinois has high real estate taxes, as well as a high flat tax on income (4.95%). Sales tax is currently 8.64%.
Most retirement income is not subject to tax. This includes Social Security. Cost of living is average for the country and some property tax breaks do exist for seniors.
Retirement income is taxable and real estate taxes are the fifth highest (proportionate to home values) in the nation.
Social Security or military pensions are not taxed and there is no inheritance tax in the state.
Nebraska has some of the highest property taxes in the nation and Social Security and pension income are subject to tax as well. Inheritance is fully taxable and no exclusions for retirement income exist.
Cost of living is low and Nebraska ranks high as one of the best run states in the country.
Cons: Michigan property taxes in proportion to home values are the seventh highest in the nation. For Michigan residents born after 1952, exemptions currently in place will be taken away.
Pros: There is no inheritance tax or estate tax in Michigan and Social Security benefits are non-taxable. The cost of living in Michigan is relatively low compared to most states in the country as well.
Vermont has some of the highest property taxes in the nation along with a high cost of living. All Social Security and pension income is subject to tax and a high marginal tax rate of 8.95% (on income over $416,700) exists.
The mountains, forests, and rivers make Vermont an excellent recreational playground. Also known for its friendly people, the state ranks high as one of the best-run states in the country.
Cons: The state of Ohio taxes some types of retirement income and the marginal tax rate is 5.95% in this state.
Pros: Currently Social Security is not taxed in Ohio and the estate state tax is no longer allowed. Ohio’s cost of living is fairly low.
High home costs and skyrocketing real estate taxes drive Connecticut’s cost of living to some of the highest in the nation. Estate taxes are high and upper income residents will pay income tax on Social Security benefits and retirement income.
For couples earning less than $48,000 per year, Connecticut allows the highest personal income tax exemption ($24,000/couple) in the nation.
9. RHODE ISLAND
Property taxes are some of the highest in the nation and Social Security retirement benefits are taxed as well. Estate taxes are applied to estates starting at $1.5 million, and the cost of living is high (ranked 42 in the nation).
Rhode Island’s rocky coast, natural waterways, bays, and harbors make this state a beautiful place to enjoy in retirement.
10. NEW YORK
One of the states with the highest property taxes in the country, New York also applies a high marginal tax rate (8.82%) to the income of residents. The cost of living in New York State is also 3rd highest in the nation.
New York does not tax Social Security income or government pensions.
Choosing where to live once you reach retirement may be one of the most important financial decisions you ever make. No longer generating the kinds of income you once did while working, means you’ll have to maximize retirement dollars while minimizing expenses. Along with other important factors, cost of living and taxes should be heavily considered before relocating to another state.