What states are best for retirement?
If you are planning to move to a senior-friendly state, you may want to know the best states for retirement. Here are the best states you should consider.
As you leave your job and head into retirement, you may be considering moving to a new state to enjoy your golden years. Usually, you might be interested in moving to a state where you have family connections or business contacts if you are planning to start a business. However, individual preferences like the cost of living, quality of life, healthcare options, taxes, and climate can weigh heavily on the best state for retirement.
The best states for retirement include Florida, Alabama, Wyoming, Nevada, Tennessee, and Hawaii. These states rank highest when you consider factors like taxes, weather, healthcare, and cost of living. Generally, most retirees would consider moving to a state with low taxes where they would get maximum savings on their retirement distributions and social security benefits.
Best States to Retire in the United States
If you want to move to a state with a good climate and sunny beaches, you could consider relocating to Florida. The sunshine state has the highest concentration of retirees above 65 years, and you have a big chance of meeting retirement-age friends in the community. Florida has active senior communities where you can find a sense of community.
Apart from the sunshine, Florida does not impose state income taxes, and you won’t owe any state income taxes on your retirement distributions. Also, the state does not tax social security benefits, and there are no estate or inheritance taxes. However, you will still pay federal taxes if you have a tax-deferred retirement account like a traditional 401(k) or IRA.
Besides the warm weather, Alabama is a good place to retire. Though you will owe income taxes on IRA and 401(k) distributions, you will be exempted from paying taxes on social security benefits. The maximum state income tax rate is 5%, and the combined state and local sales tax can go up to 9.24%.
If you are above 65, you will be exempted from paying the state property taxes. The property tax is split between the state and local government, and the average real estate property tax is about 0.96%
Alabama has dozens of recreational activities for seniors such as fishing, boating, beaches, golf courses, and museums.
Wyoming has relatively smaller cities, and it is a good place to retire if you are looking for a quiet retired life. It has a 4-season climate, you can enjoy various outdoor recreation activities available in the state.
Wyoming is a tax-friendly state for retirees, and you won't pay state income taxes on 401(k) and IRA distributions. Also, sales tax is low, and the cumulative state and sales tax rate can go up to 5.75%. However, Wyoming does not tax social security income, and there is no estate or inheritance tax.
If you want your retirement savings to last, you should consider moving to Nevada. There are no state income taxes, you can collect social security benefits, private and public pensions, and retirement distributions without owing any state income taxes.
Nevada has one of the lowest property tax rates in the US, and the average effective tax rate is about 0.53%. There are no property tax breaks for retirees. In comparison, Nevada's sales tax is above average, and you can expect to pay about 6.85%; the combined state and local sales taxes can go up to 8.23%.
Tennessee is usually a top choice for retirees due to its natural beauty, mild temperatures, and tax friendliness. You won’t pay taxes on withdrawals from retirement accounts, social security, and pension. Tennessee is among the states with the cheapest costs of living.
Property taxes are not bad, either. The average effective tax rates are about 0.64%. The state has property relief programs that offer tax reimbursement to income-eligible senior citizens. However, Tennessee has one of the highest sales taxes in the US, averaging 9.55% in combined state and local sales taxes.
Health is a big factor when deciding where to retire, and Hawaii ranks among the best states with good health systems. This explains why Hawaii has one of the highest life expectancies in the country at 86.5 years.
If you retire in Hawaii, you won’t pay taxes on social security income and employer contributions to 401(k) plans. However, you will pay state income taxes on your taxable income, and the rate can go up to 11% for singles earning over $200,000 or joint filers earning over $400,000 annually.
Hawaii ranks among the states with the lowest property tax rates, even though the value of real estate is high. However, depending on where you live in Hawaii, you could qualify for property tax reliefs. You can also expect to pay low sales tax rates, and the combined state and local sales tax can go up to 4.4%.
Does it make financial sense to relocate to another state in retirement?
If you have always wanted to move to a tax-friendly state or a state with sunny beaches, retirement may be the best time to relocate. Some states like Florida and Hawaii have tens of hundreds of outdoor activities that you can indulge in. The weather is also a big factor- senior citizens want to move to an area with a lot of sunshine and mild temperatures.
If you want to save money on taxes, you may consider moving to a state with no state taxes, low property taxes, low sales tax, and tax relief programs for seniors. You may also consider moving to a state that does not tax social security benefits, or impose inheritance or estate tax.