Retirees have many things to consider when it comes to deciding where to settle down during their golden years. In addition to choosing a location that's close to friends and family, seniors must also determine where their retirement savings will be able to give them the lifestyle they envision. Some states make it easy, with no taxes on pension or Social Security income, while others attract retirees with low taxes on real estate, income and everyday purchases. Explore these states with retirement-friendly tax plans to find the spot that best suits your needs.
Best States Overall
With no state income or sales taxes, Alaska represents the best state for retirees, according to Kiplinger. The state also has no inheritance or estate taxes and pays each permanent resident an annual oil dividend that often exceeds $1,000. With the exception of the oil dividend, Nevada, Wyoming and Mississippi offer many of the same tax benefits for seniors, though residents of all ages should be prepared to pay sales tax in these states ranging from 4 to 7 percent. Finally, the state of Georgia doesn't have estate or inheritance taxes but does charge income tax ranging from 1 to 6 percent. Fortunately for seniors, this state income tax will be phased out on retirement income by 2016.
Best for Pensions and Social Security
Twelve of the 50 states exempt pensions and Social Security income from income taxes, making them havens for retired and senior individuals, according to U.S. News and World Report. These 12 states are Alabama, Alaska, Florida, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington and Wyoming.
Lowest Property Taxes
If you're more concerned about property taxes than other types of income or sales tax, consider settling in a state with a low real estate tax rate. Louisiana offers the lowest property taxes in the country, with a rate of 0.18 percent, followed by Hawaii and Alabama with 0.26 percent and 0.33 percent. Delaware, with a rate of 0.43 percent, and Washington, D.C., with 0.46 percent, round out the top five.
States With No Income Tax
Of the 50 U.S. states, nine have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming. If you plan to work during your retirement, consider one of these states. However, warns Forbes, a low tax rate might mean a lower level of resources for retirees to take advantage of.
Worst States for Retirees
Kiplinger also lists the top 10 states that retirees should avoid. They are California, Oregon, Montana, Nebraska, Minnesota, New York, Vermont, Connecticut, New Jersey and Rhode Island. Each of these states is included on the list for its own combination of unfriendly tax policies for retirees. For example, New York has some of the highest property taxes in the nation, while California charges one of the highest rates for income tax. In the state of Minnesota, seniors should expect to pay taxes on both pensions and Social Security income.
Video of the Day
- retirement Coin box pink pig and hand image by yellowj from Fotolia.com