While the majority of seniors prefer the warm climate and leisure activities of states such as Florida and Texas, they are not necessarily the best where income is concerned. Finding the best states for retirement is all about striking a balance between taxes and livability.
Many retirees judge the best states for retirement based on an oversimplified view of the state tax laws. But the fact is, some of the states that have no income tax more than make up for it in other forms of tax. This can lead to paying exorbitant amounts each year in taxes if you’re not careful.
Retirees want to save as much of their money each year as possible, and many believe that the best states for retirement are the ones like Pennsylvania that do not charge anything on retirement income. Although this is an understandable reaction, failure to look closer can cost these seniors dearly every year.
Perversely, Pennsylvania is actually one of the least affordable places in the United States to live. The average property tax in Harrisburg, PA, amounted to an incredible $6,551. Combine that with $840 on average in sales tax, and Pennsylvania residents are really paying approximately $7,391 in taxes per year.
Surprisingly, states like Arkansas and Delaware offer the best deal for seniors. Living in Dover, DE, costs on average around $543 per year in taxes. Kentucky is another affordable state for seniors, with residents of Frankfort paying around $1,114 per year. This is a bargain when compared to the supposedly tax friendly states such as Pennsylvania and Florida. Residents of Florida pay around $3,424 per year.
Although income tax is a major component of the overall tax burden, it is very important to take other factors into account. As you’re conducting your research of the best states for retirement, be sure to look at the cost of homes, as well as the cost of living. In areas with high property values, property tax can eat up a great deal of income each year. Avoid paying too much by researching state tax laws before making a move.
Online sources such as Kiplinger and Taxsites.com can help greatly in the search for the best states for retirement.
Just because a state has the lowest taxes doesn’t that it’s among the best states for retirement. The general livability of a state is also important. But don’t neglect to check out a state’s tax laws before moving. Some states, such as Pennsylvania, can quickly eat away at your retirement fund if you are not careful.