Retirees have traditionally stayed close to home in retirement — close to family, friends, familiarity. The transition to retirement can be traumatic enough, from full-time work to full-time leisure, from a paycheck to an annuity payment, from having no free time at all to having too much free time. Why complicate matters by throwing in a move to an entirely new location?
But many retirees are doing just that. Many people are retiring early, and most of us can anticipate living longer in retirement — even thirty years or more. Retirement isn’t the end stage of one’s life, but the beginning of an entirely new life. As such, we may have new dreams we wish to pursue, whether travel, education, hobbies and other activities, or even working again, and in pursuit of these dreams we may need a change of locale.
New location: How to choose
There are many criteria for choosing a new place to live, but one way to start is by asking, what are the best retirement states in regards to various state taxes? And here, too, there are many criteria we can follow. We can start by asking which states will be most favorable to our pocketbooks.
States with No State Income Tax
Seven U.S. states do not impose a state income tax, which can obviously result in huge savings over the years:
· South Dakota
Florida and Texas are already tremendously popular among retirees, while Nevada and Washington have good possibilities as well.
New Hampshire and Tennessee tax only interest and dividend income, not earned income, pension income, or Social Security income. However, since many retirees derive at least some of their income from interest and dividends, these two states may not offer substantial financial benefits over other states. However, eastern Tennessee boasts one of the lowest costs of living in the United States, and the area’s proximity to the Smokey Mountains makes it attractive for other reasons as well.
Additionally, Alabama, Mississippi, and Pennsylvania, although they impose state income tax, do not tax Social Security or retirement pension income. If your primary income in retirement will be from either or both of these sources, that’s as good as tax-free income, at least as far as state taxes are concerned. Alabama and Mississippi also provide a very low cost of living, warm climate, and coastlines along the Gulf of Mexico. In fact, nearly the entire Gulf Coast (excluding Louisiana) offers substantial tax benefits to retirees
States with No Sales Tax.
Five states don’t charge sales tax on retail purchases:
· New Hampshire
Two of these states — Alaska and New Hampshire — also don’t impose income tax or tax on retiree income, respectively, although they are otherwise not the cheapest states in the U.S. to live in.
Other Important Factors
Of course, taxes are not the only variable to consider when determining the best retirement states. Factoring in overall cost of living, low crime rates, and high life expectancy (indicating good health care and a healthy environment), several mid western states become attractive. Iowa and North Dakota score surprisingly high, particularly with regard to life expectancy — perhaps the frigid climate helps one live longer! Idaho and Vermont are two other northern states with cold climates but low crime rates.
Live in Hawaii?
Many people dream of retiring in the tropics, and Hawaii is as close as one can get to that ideal within the United States. And Hawaii scores high with regard to life expectancy, which, at 80 years, is the highest in the country. However, Hawaii is the most expensive state in America to live in. You can’t have it all!
Choosing the best retirement state is a matter of personal choice more than anything. When deciding on the most attractive retirement destinations, you should consider factors such as life expectancy, crime rates, and especially taxes and cost of living, but the decision should boil down to how you want to spend your time in retirement and how a particular destination can help you achieve that.