How is South Dakota for retirement?
Learn how South Dakota is for retirement, how it taxes retirement incomes, and the pros and cons of retiring in the Coyote State.
The open plains of South Dakota are calling you for a great retirement. Perfect for retirees looking for a quiet retirement, it’s an open and friendly state where your income will stretch easily. While not as diverse or action-packed as some states, you have generally good weather, plenty of outdoor activities, and a slow pace of life to look forward to.
South Dakota is one of the cheapest states for retirement living. There is no state-level income tax, so everything from Social Security and private/public pension right through to 401(k) and IRA withdrawals is only subject to federal income taxes. The sales tax is slightly below average, and property taxes are moderate. There are also some programs to help low-income seniors. Paired with a low cost of living, this makes South Dakota budget-friendly for retirees.
Is South Dakota Tax-Friendly for Retirement?
South Dakota is a fairly tax-friendly state for retirees. It is one of the most tax-friendly states for seniors. There are no state income taxes. This means that your Social Security retirement income, pension income, and even 401(k) and IRA withdrawals are tax-free.
Additionally, unconventional retirement income sources, like non-retirement investment income and property income are tax-free at the state level. You still owe federal income taxes on the money, but this is a great state to stretch your retirement income as far as possible.
How much are sales taxes in South Dakota?
The state sales tax rate in South Dakota is 4.5%. Many cities add 1.9% in sales taxes, but this still compares favorably with other states. Nebraska collects sales taxes of up to 7% while North Dakota collects up to 6%.
While prescription medication and medical services are exempt from any sales tax, South Dakota collects sales taxes on both clothing and groceries.
The gasoline tax is $0.28 per gallon, which is average compared to other states. Additionally, there are no inheritance or estate taxes, so you can leave a legacy for your family with zero worries.
How much are property taxes in South Dakota?
Property taxes are the only downfall in South Dakota. The average effective property tax rate is 1.08%, which is slightly higher than the national average. However, property costs are reasonably cheap, and the overall cost of living in South Dakota is rather low, so you shouldn’t feel the impact too greatly.
Additionally, there are some senior-focused rebates for low-income households you can take advantage of. If you are over 70, you can opt to defer property taxes until the sale of the property. However, this is only available if your income is below $16,000 annually ($20,000 for joint filers or multi-person households).
The state also offers the Property Tax Reduction from Municipal Taxes program to reduce municipal taxes. If you are age 65 or older, and your household income is below $5,758 (or $7,765 for joint filers), you can reduce your municipal taxes at between 17%-35% (single households). This increases to 22%-55% for multi-person households.
Pros of retiring in South Dakota
Low cost of living
Undoubtedly, this is one of South Dakota’s stand-out features for retirees. With decidedly average sales tax, no taxes on retirement income, and a moderate property tax system with a low cost of living, a little goes far in this state.
South Dakota houses Mount Rushmore and the Black Hills, both of which offer plenty of scope for summertime outdoor living. It’s a great state for hiking, fishing, and golfing.
While South Dakota can feel a little empty at times, you’ll find the local communities hospitable and welcoming. There are typically plenty of local activities to help you feel a real part of the community.
South Dakota is ranked in the middle of the states for healthcare, with several renowned hospitals in the area. You can find senior-focused care facilities, too, so if you have health concerns, there are still plenty of options.
Sunny dry summers
South Dakota offers varied scenery, depending on which area of the state you choose. Pair this with low humidity and sunny summers, and you’re sure to find something to enjoy.
Cons of retiring in South Dakota
South Dakota is a big state with a lot of space, and even urban areas can feel empty. For some seniors, this may be a pro, but others might find it a little lonely. Offset this by opting for one of the urban centers.
South Dakota has warm summers, but the fall and winter seasons are cold. Paired with low humidity, mercurial changes in weather, and high winds, it could be off-putting for retirees.
Small town culture
While there are occasional highlights in the state, especially regarding Native American culture, South Dakota may feel a little limited if you’re used to a lot of variety and vibrancy. You may need to travel long distances to find dining and entertainment options.
If a small-town charm is right up your alley, this won’t bother you. But outside of the urban centers (and arguably in them, too), amenities are quite limited in this state.
If your retirement income covers you 100%, this won’t be a worry. But despite a thriving economy, average wages are low here. So, if you’re hoping to pick up odd jobs to keep you busy, don’t expect much from them.
Best places to retire in South Dakota
The largest city in the state, Sioux Falls is a great place to head if you’re looking for maximum access to amenities and activities. Here you’ll find some cultural attractions, large-scale shopping, and excellent healthcare for a busy retirement.
A tiny town of just over 11,000, Spearfish is a great place for a quiet retirement. The cost of living is low, and the Black Hills offers beauty and one of the mildest climates in the state. You can even ski in the winter.
While Brookings is best known as a college town thanks to the South Dakota State University, it has a vibrant charm and some great cultural opportunities you won’t find in many South Dakota towns. The medical care is excellent, especially with the university on hand. It’s still a small town but has the feel of a larger one.
While technically the third-largest city in South Dakota, Aberdeen is intimate with a great sense of community. The weather is less extreme than in some parts of the state, and there are some fantastic amenities to keep you busy, including family-friendly attractions to share with your grandkids.