How is Maryland for retirement?

When planning for your retirement, the state where you retire can greatly impact your quality of life in retirement. Maryland often emerges as an attractive state for retirees seeking a mix of urban amenities and serene retirement communities. Before making the move to Maryland, there are certain things you should know about the state.

While Maryland is not ranked among the best states for retirement, it is an attractive state for retirees seeking scenic landscapes, a long coastline of beaches, a mild climate, high-quality healthcare, and tax benefits. Retirees enjoy state income tax exemption on Social Security benefits and Railroad Retirement Benefits. Seniors age 65 or older may enjoy pension income exclusion of up to $34,300 per year.

Is Maryland a tax-friendly state for retirement?

Most retirees, but not all, find Maryland tax-friendly for retirement. The state exempts certain types of retirement incomes from state income taxes but fully taxes other forms of retirement income. Social Security income and Railroad retirement benefits are exempted from state income taxes in Maryland.

If you are age 65 or older, or you or your spouse is totally disabled, you may qualify for pension exclusion of up to $34,300 for 2022. If your pension income is below the set limit, you will enjoy full exemption on state income taxes. Maryland considers income from employee retirement systems as pension income eligible for pension exclusion. Incomes from 401(k), 403(b), and 457(b) plans qualify for pension exclusion.

However, withdrawals from a traditional IRA, SEP, or Keogh plan do not qualify for the pension exclusion and will be taxed fully. Withdrawals from a Roth IRA won't be subject to state income taxes as long as they are qualified withdrawals.

Additionally, Maryland has estate and inheritance taxes. Estate taxes apply to the estates of a deceased citizen with a value of more than $5 million. If your estate is valued below $5 million, you won't owe estate taxes. The state also levies an inheritance tax at 10% of the clear value of inherited assets worth at least $1,000. However, many descendants like spouses and children are exempt from inheritance taxes; the tax applies to distant relatives and non-relatives who receive an inheritance.

How much are sales taxes in Maryland?

Maryland has a statewide sales tax rate of 6% on goods and services. Cities and counties in Maryland do not collect additional sales taxes. Overall, you can expect to pay an overall sales tax of 6%. The state also collects a 9% alcoholic beverage tax. Maryland exempts items such as groceries and prescription drugs from sales taxes.

The 6% sales tax also applies for tangible goods purchased from outside Maryland either in person, online, or over the phone. The sales tax protects local businesses from unfair competition from businesses outside the state.

How much are property taxes in Maryland?

Maryland has an average property tax rate, with an effective property tax rate of 0.99%. However, homeowners generally pay higher property taxes due to the high property values in the state. The average Maryland homeowner pays about $3,660 in property taxes every year.

If you own and use your home as your primary residence, you may be eligible for the Maryland homestead tax credit. This credit limits annual increases in the assessed property value to 10%, and you will get a credit equal to any increases above 10%. For example, if your property is valued at $300,000, and it is reassessed to $360,000, the homestead credit will be $30,000 [$360,000- $300,000 – (10% x $300,000)].

Pros of retiring in Maryland

Long coastline

If you enjoy fishing, boating, canoeing, kayaking, or any other activity that is related to being around water, you will enjoy the over 4,000 miles of coastline. The state touches the Atlantic Ocean, the Chesapeake Bay, and the Potomac River. The state is also home to 400 lakes and more than a dozen rivers and creeks, which provide plenty of recreation opportunities.

Rich history

Maryland is one of the 13 original colonies, and its history dates back as early as the 1500s. The state's capital, Annapolis, was established in the mid-1600s, and it is one of the oldest cities in the United States. The state has unique properties that are included in the National Register of Historic Places as well as more than a dozen museums and monuments.

Mild climate

Maryland experiences all four distinct seasons while avoiding extreme weather. Summer tends to be warm with temperatures averaging 65 degrees Fahrenheit, while winters are cold but not chilly. Seniors can explore the state year-round without getting involved in extreme weather.

A sport’s lover’s paradise

If you are a sports lover, you will like it in Maryland. The state has a Major League Baseball Team, a Major League Lacrosse Team, and two National Football League teams. Lacrosse is the official team sport of the state, but the die-hard fans across all sports inspire a sense of community in the state.

Craft beer breweries

Maryland is a market leader in craft breweries, and it hosts the Maryland Craft Beer Festival. The event features over 40 local breweries, including some that are not publicly available.

Farm-to-table restaurants

Maryland is one of the pioneer states when it comes to farm-to-table restaurants, which combines state farms with restaurants. This makes fresh food more readily available to residents. Some notable farm-to-table restaurants include Maggie’s Farm and Founding Farmers.

Good healthcare

If you want to retire in a state with good healthcare, Maryland has more than a dozen top healthcare facilities and specialists. The state has some of the best hospitals in America, including Johns Hopkins Hospital, Sinai Hospital of Baltimore, Mercy Medical Center, and the University of Maryland Medical Center.

Cons of retiring in Maryland

Traffic congestion

The major metropolitan areas of Maryland often experience massive traffic. You should be prepared for longer commutes on the major highways. Also, while the state is only 30 minutes away from Washington D.C., it can take up to 90 to drive to the nation's capital.

High cost of living

Maryland is one of the most expensive states in the United States, with Annapolis and Baltimore leading the park. There are many high-paying jobs, and this drives up the cost of housing, utilities, healthcare, rent, and groceries. However, you will find the rural areas and small towns cheaper to live in than the major metropolitan areas.

High crime

One of the things you must consider when moving to Maryland is safety. Most cities like Baltimore have a high crime rate and are ranked among the most dangerous places to live in. There is a high number of reported violent crimes, drug use, and homicide. But, there are some relatively safe retirement communities, and you can take steps to ensure your safety.

Homelessness

Like most cities in the United States, homelessness is a common problem in Maryland. You can find encampments and squatters in the big cities, but the state is actively trying to clear the streets by relocating them to temporary housing areas.

High property values

If you plan to buy a retirement home in Maryland, you will find more expensive homes due to the strong economy and high household incomes. The average price of a home in Maryland is $300,000, but you should expect to pay more for a property in a good location and with extra amenities.

Best places to retire in Maryland

Annapolis

If you want to retire in a city with easy access to big city amenities, Annapolis is a good choice. Annapolis is the capital city of Maryland, and it boasts waterfront properties, historic charm, and it has a good view of Chesapeake Bay.

You can visit the city’s historic district to learn about naval history and the 18th-century architecture. You will find bustling water activities including sailing, fishing, kayaking, and canoeing. There are many green spaces, museums, art galleries, and performing art centers.

Easton

Easton lies on the shores of Chesapeake Bay, and it offers easy access to the waterfront. This city has a fairly good weather- mild winters and warm summers, which is perfect for enjoying the beautiful gardens, beaches, playing golf, etc. You will also fund Victorian or Colonial architecture in this city. Though Easton can be pricey, it offers plenty of amenities like art galleries, music venues, theatre performances, world-class golf courses, water sports, and fishing.

Cambridge

Cambridge is a port town located on Maryland’s Eastern Show, and it offers small-town vibes. It has a rich maritime heritable, and you will find water-based landmarks like the Choptank River Lighthouse and the Long Wharf Park. Nature lovers will find plenty of hiking opportunities in the city. If you are looking to learn history, you can stroll through the various local museums in the city.

Bel Air

Bel Air is a Baltimore suburb that is known for its family-friendly neighborhoods. It lies on the banks of Elk River, which provides a lush natural setting with numerous trails, including the Bynum Run Park or the Walls Cook Trail Park. You will find many art galleries and museums in the city. You can also get fresh farm produce at the Saturday Farmers Market.