When you think of retirement, you likely picture sunny beaches and palm trees swaying in the breeze. Not so fast. There are benefits to living in other places, including tax exemptions, access to amenities and weather. In the end, though, most retirees will choose the place they personally prefer.
Florida draws retirees from around the world, thanks to its low cost of living and warm weather. But the varying seasons and access to amenities in New Jersey make it an attractive option, as well.
Retiring in New Jersey
If you’ve spent a considerable part of your life in the northeastern part of the U.S., you probably already have a compelling reason to stay in the area: it’s home. As Baby Boomers have hit retirement age in large numbers, New Jersey has become a popular place for seniors to spend their golden years. There are numerous 55-plus communities, many offering the same amenities you’d see in the top neighborhoods in Florida.
Although it may be quite a bit chillier than Florida, New Jersey has something that people who aren’t from there forget. There are no fewer than 44 beaches in New Jersey, including the always-popular Atlantic City. On the Jersey Shore, you’ll find several great 55-plus communities with features like golf courses, restaurants, bars, shops and activities.
Retiring in Florida
It’s no secret that Florida, lovingly dubbed “heaven’s waiting room,” is a huge draw for retirees. More than 23 percent of the state’s population of 20 million are those over the age of 60. That means if you move there, you’ll find no shortage of peers, not to mention all the communities and amenities geared toward the unique needs of retirees. Even something as small as more disabled parking can be a bonus for retirees with health issues.
If a 55-plus community is in your future, you can take your pick in Florida. There’s The Villages, an expansive gated community with a population in the six figures, located in the center of the state. If you prefer, you can sip margaritas by the ocean at one of the many 55-plus communities located along Florida’s shores, including Latitude Margaritaville on Daytona Beach. If you’re looking for a state that specializes in retirement, look no further than Florida.
Cost of Living
There’s a reason retirees flock to Florida: it’s inexpensive, especially compared to states like New Jersey. In almost every area, Florida one-ups New Jersey financially, with cheaper groceries, housing, utilities and transportation. The median home cost in Florida is less than half of what you’d pay for a similar home in New Jersey, and that can be a problem for a senior on a fixed income.
One area where you’ll see less of a difference, though, is healthcare. Although New Jersey is more expensive, the difference is slight. Considering Florida ranks as one of the lowest when it comes to quality of healthcare, it’s definitely worth considering cost versus what you’ll receive in New Jersey, a much higher-rated state in terms of healthcare.
Climate: Florida Versus New Jersey
It’s probably no surprise that you’ll get warmer weather in Florida than New Jersey since Florida is clearly in a better geographical position for those who enjoy the sun. However, not everyone is a fan of year-round warm weather, and some retirees actually enjoy the beautiful autumns and steady winter snowfalls you’ll get in exchange for retiring in NJ. Additionally, summers in Florida can be scorchers, and New Jersey gets warm, but it’s a warmth that’s still somewhat bearable.
If year-round warm weather is a priority for you as you age, though, the facts support Florida as the overwhelming choice. In beautiful Atlantic City, New Jersey, you’ll get lows in the 20s in December and January, with an average high of 63.9 degrees Fahrenheit and a low of 44.8 degrees Fahrenheit. The Villages, Florida, will give you average highs of 82 degrees Fahrenheit in Orlando and 64.3 degrees as a low. In December and January, you’ll see lows in the 50s in Orlando, with highs in the 70s.
New Jersey Activities for Seniors
Whether you’re retiring in New Jersey or Florida, chances are you plan to have plenty of free time on your hands. If you choose a 55-plus community, you’ll hopefully have activities there to keep you busy, but you’ll also want day trips and local amenities to keep you active.
For day trips, New Jersey has plenty of options, including numerous beaches, Atlantic City, Six Flags, historic sites and recreational areas. You’ll also have a short drive for weekend trips throughout New York and New England, where you’ll never run out of places to visit.
Florida Activities for Seniors
As with New Jersey, you can take your pick of beaches in Florida, not to mention amusement parks and recreational sites. You may not find the history you’ll get in New Jersey, though. If you’re a history buff, you can always make a quick trip to Saint Augustine, the oldest city in the United States, which has events and tours throughout the year.
One thing that may tip you in the favor of Florida is the ease of which you can make those trips. You can often find senior-geared bus trips leaving on a regular basis throughout the state, especially if you choose to reside in a 55-plus community. You’re also in close proximity to the many cruise ship departure ports in the state, making it easy to grab a good last-minute deal on a trip to an island.
State Income Tax
One major differentiating factor between Florida and New Jersey is state income tax. In Florida, there’s no state income tax, and the sales tax is 6 percent. In fact, the state is known for having one of the lowest tax burdens in the country, making it a plus even for seniors no longer earning taxable income.
New Jersey, on the other hand, has a fairly sizable tax burden, with a state income tax that’s based on the taxpayer’s income for the year. You’ll also pay a sales tax of 6.625 percent, and property taxes average 1.89 percent on the assessed value of your home, among the highest rates in the nation. Compare this to Florida’s property tax of 0.97 percent of assessed value, on average.
Florida Sales Tax
Florida’s sales tax is only 6 percent, but that’s a base rate. Local areas have the right to add on to that, which means you could pay sales tax of as much as 8 percent. If you live in Orlando, for instance, the county charges its own 0.5 percent sales tax, for a total tax of 6.5 percent.
In Florida, though, you’ll pay sales tax on items like clothing and medicines. But you will be able to purchase most groceries, medical devices and medical services without paying tax. It’s also important to be aware that in some touristy areas, you’ll pay an additional tax geared toward taking advantage of the state’s annual influx of visitors.
New Jersey Sales Tax
If you’re a shopper, retiring in New Jersey may be more attractive. The state has a higher sales tax than Florida, at 6.625 percent, but New Jersey is rare in that it has one fixed sales tax for the entire state. That means unlike many states, where local jurisdictions can tack on an additional 2 percent or more to the base sales tax, you’ll pay 6.625 percent no matter where you go.
In New Jersey, you’ll get a break on sales tax on many of the basics you’ll buy on an annual basis. Most clothing and footwear sold for human use are exempt from sales tax, as are groceries, magazines and periodicals, disposable paper products and both prescription and over-the-counter medications. Medical and legal services are also sales tax exempt.
Social Security Tax
Although you may still owe federal taxes on your Social Security, assuming you have other earnings coming in, you can at least be relieved of worrying about state taxes in Florida. There are no local taxes on your Social Security income. You also won’t have to worry about taxes on any pension or 401(k) income in Florida.
If you’re leaning toward New Jersey for your retirement, there’s good news here, as well. Although there is a state income tax, you won’t pay it on Social Security. If you’re getting money from a retirement account or pension, as long as you stay below $65,000, you won’t have to pay taxes on those, either.
Taxes on Investments
When you’re thinking about retirement, you probably realize that one of the many similarities between stocks and bonds is the tax you’ll owe on them at retirement time. Again, you’ll benefit in this area if you choose Florida as your home since the state has no state income tax on any income you earn from your investment accounts.
However, you won’t fare the same in New Jersey. The state looks at the similarities between stocks and bonds and other types of income, charging state income tax on any income you earn in the tax year. However, if your income is related to distributions from a qualified investment fund that’s linked to exempt obligations, you won’t owe state income tax on it.
Florida Inheritance Tax
In Florida, the inheritance tax shares some of the similarities between stocks and bonds when it comes to taxability. There is no estate tax in Florida, so if you or someone you love dies and passes the money on, you won’t pay taxes to state authorities. You’ll still be subject to federal estate tax, although in many cases those assets fall below the $11.4 million exemption, so you’re off the hook.
You’ll now get that inheritance tax freedom as a benefit of retiring in NJ. The state did away with its estate tax, so for those who die after December 31, 2017, no estate tax will be imposed on the assets that transfer to survivors.
Homestead Exemptions: Florida vs. NJ
One break you’ll get in Florida that you won’t get by retiring in NJ comes in the form of Florida’s homestead exemption. The state has so many part-time residents and vacation properties, it offers an incentive to stay around all year. In order to qualify for the exemption, homeowners must purchase a property and make it the permanent residence of themselves or a dependent. You’ll get an exemption of $25,000 on the first $50,000 of your home’s assessed value.
To apply for Florida’s homestead exemption, you can either fill out an application online or go to a government service center, located throughout the state. Your home address will need to be up to date on your driver’s license or another form of identification before you apply. You won’t have to reapply every year. Once you’ve been approved, your exemption will apply automatically as long as you continue to qualify.
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- U.S. Climate Data: Climate Orlando - Florida
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- Forbes: IRS Announces Higher 2019 Estate And Gift Tax Limits
- State of New Jersey: Inheritance Tax
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- State of New Jersey: New Jersey Sales Tax Guide T
- Asset Protection Planners: Homestead Exemptions by State and Territory
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Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.