How is Iowa for retirement?

If you are looking for a peaceful retirement that is easier on the wallet, you should check out Iowa. The Hawkeye State is known for its natural beauty, low cost of living, access to healthcare, and low taxes, making it a good choice for retirees looking to stretch their retirement income further.

Iowa is ranked among the best states for retirement due to its low cost of living, favorable tax system, good healthcare, low crime, and good weather. The state exempts Social Security benefits from state income taxes, while other retirement incomes enjoy a deduction of up to $6,000, or $12,000 if you are a married couple filing jointly. Starting the tax year 2023 (which you will file in 2024), individuals age 55 or older will be exempted from state income taxes on retirement incomes.

Is Iowa a tax-friendly state for retirement?

Iowa is considered a tax-friendly state for retirement, and it is a good choice for retirees looking to stretch their retirement incomes further. The state exempts Social Security income from state income taxes. Other forms of retirement income such as pension and retirement savings plan distributions are eligible for deductions of up to $6,000, or $12,000 if you file jointly.

However, starting the tax year 2023 (which you will file in 2024), individuals age 55 and older will be exempt from state income taxes on all retirement incomes. This exemption also applies to retirees age 55 or older who do a Roth conversion i.e. rollover from a traditional 401(k) or IRA to a Roth 401(k) or Roth IRA.

Additionally, you should expect to pay sales taxes on goods and services purchased in Iowa. The statewide sales tax is 6%, while counties collect an additional sales tax. On average, you will pay a sales tax of about 6.84%. The state exempts food, prescription drugs, and some non-prescription drugs from state income taxes.

How much are property taxes in Iowa?

Property taxes in Iowa can be high, with an average effective property tax rate of 1.50%. However, since property values are relatively low in Iowa, the property taxes paid are within the national average. Since property taxes are determined locally, the property rates vary across the cities and counties.

Iowa homeowners may be eligible for the homestead credit, which provides a form of property tax relief to homeowners who use their property as a primary residence and occupy the residence for at least six months each year. However, nurses and military officers who own a home in Iowa may be eligible for the homestead exemption even if they don’t meet the occupation period requirement. The credit is equal to the property tax levy on the first $4,850 of the property value.

Seniors age 65 or older may be eligible for an additional homestead tax exemption on their primary residence. For the tax year beginning January 1, 2023, the tax exemption is $3,250 of the property value, and it increases to $6,500 in the tax year beginning January 1, 2024.

Pros of retiring in Iowa

Good weather

Iowa experiences all four seasons, which provide plenty of opportunities to explore nature throughout the year. During the summer, temperatures can reach highs of 80s and 90s degrees Fahrenheit. You can play golf during the summer, or go hiking, biking, and fishing. During the winter, temperatures can drop below 30 degrees Fahrenheit.

Low cost of living

Iowa has an affordable cost of living, which is a big advantage for retirees on a fixed income. You will pay less for groceries, utilities, healthcare, and transport compared to other states, and this makes the state attractive for retirees on a budget. Also, since the state is landlocked, there are not as many recreation spots such as beaches, which means you get to keep most of your money.

Low crime

Iowa ranks among the safest states in the United States, and you can rest easy when you retire in the state. Violent crimes like murders and mass shootings are rare, and you can grow old without a single incident. Few homeowners feel the need for a security system, and most people feel relatively safe at home.

High education standards

Iowa ranks highly for its education standards, and it has one of the highest high school graduation rates. Students score high on the ACT and SATS, and there are excellent universities to consider including the University of Iowa, Iowa State University, and the University of Northern Iowa. You can also find outstanding private colleges, but you will pay more than when enrolled in a state-funded university.

Plenty of outdoor opportunities

You will find stunning rolling hills, prairies, lush forests, rivers cutting through limestone bluffs, as well as state and national parks. With the good weather year-round, you will have plenty to do, including hiking, camping, kayaking fishing, and walking. If you are keen on exploring the cultural scene, you will find numerous museums, theaters, and performing art centers. You will also find festivals and events that you can attend.

Cons of retiring in Iowa

Extreme weather

Iowa is prone to tornadoes and severe thunderstorms several times each year. The western and southwestern parts of Iowa are the most vulnerable to tornadoes, and this can be a concern for seniors living in these areas. Additionally, winters in Iowa can be harsh, with temperatures dropping as low as -50 degrees Fahrenheit.

Limited recreational opportunities

If you are looking to retire in a state with beaches and water sports, you might be disappointed with Iowa. The state is landlocked, and this means there are no ocean beaches or access to the coastline. But, there are many lakes in the states that offer lakeside entertainment options, dining, and camping opportunities. Additionally, there are no mountains in Iowa; Hawkeye is the highest point in the state, at only 1670 feet high.

Limited public transportation

Public transportation is limited in some towns in Iowa, and you may need to have a private car for easy movement across the state. If you prefer not to drive in retirement or plan to rely on public transit, you may want to settle in the bigger cities that have a public transit system.

Limited Healthcare facilities

While Iowa has some excellent healthcare facilities, specialized services, and specialists may be more readily available in the neighboring states. Most retirees requiring specialized care can opt to cross over to Chicago in the neighboring Illinois, which is known for world-class healthcare facilities and specialized healthcare services.

Best places to retire in Iowa

Des Moines

If you want to retire in a big city environment, check out Des Moines, the capital city of Iowa. The city offers a variety of urban amenities including top-quality healthcare facilities, shopping centers, restaurants, museums, and performing art centers. Also, Des Moines has a relatively low cost of living compared to other major urban centers in the state.

Iowa City

Iowa City is a college town, and it is home to the University of Iowa, which provides educational and cultural opportunities for seniors. It offers artsy vibes, and retirees can get a taste of the local performing arts at the historic Englert Theatre, Hancher Auditorium, and the FilmScene. Iowa City has a vibrant downtown with shops, restaurants, hospitals, cultural attractions, etc. You can also find various clubs, festivals, and events that are organized throughout the year.

Ames

Ames is home to Iowa State University, and it offers a vibrant college atmosphere and opportunities for art and culture. If you are interested in pursuing further education in retirement, you can take advantage of courses that are open to the public. You can also engage in university events and festivals.

Cedar Rapids

Cedar Rapids is a good place to retire for an outdoorsy person, and it lets you explore nature and enjoy the surrounding environment. Its location along the Cedar River provides a variety of outdoor opportunities like fishing and kayaking; you can find trails, parks, and golf courses along the river. You can explore cultural attractions like art galleries, museums, and theatres to appreciate the local art. The Cedar Rapids Museum of Art and the National Czech and Slovak Museum are some of the popular places you can visit.