Where Should I Retire? Tax Friendly States for Retirees

Prior articles in this series have focused upon the vast differences in state taxes as they relate to retirees.  New Jersey, for example, proved to be a ready example of a “tax unfriendly state” due to real estate, income, inheritance and estate taxes.  It was hardly a groundbreaking revelation!  At the other end of the spectrum, Georgia, South Carolina and Florida were identified as comparative tax havens for retirees.

Kiplinger’s Magazine and web site, www.kipliner.com, has compiled a list of the 10 Most Tax-Friendly States based upon how each state treats taxes relating to retiree’s income, Social Security, IRA draws, pension, estate and inheritance tax:

Kiplinger’s Top Ten Tax-Friendly States for Retirees

1)    Alaska

2)    Wyoming

3)    Georgia

4)    Arizona

5)    Mississippi

6)    Delaware

7)    Nevada

8)    Louisiana

9)    South Carolina

10) Florida

Unless a retiree really embraces a rugged, outdoor life style Alaska will not be part of the plan.  However, Arizona and, perhaps, Louisiana should be added to the list of warm weather destinations.  Taxes should not be the primary driver of where to live in retirement but they desire consideration.

On the flipside of tax friendly states, Kiplinger’s offers a list of the ten most unfriendly states for retirees.  There should be some consolation for New Jersey and New York residents as there are eight states that are even more unfriendly with regards to taxes and retirees:

Kiplinger’s Top Ten Tax-Unfriendly States for Retirees

1)      Rhode Island

2)      Vermont

3)      Connecticut

4)      Minnesota

5)      Montana

6)      Oregon

7)      Nebraska

8)      California

9)      New Jersey

10)  New York

As a reminder, state residency needs to be established and maintained.  Your driver’s license, car registration, voter’s registration and primary mail address are all indications of where someone lives.  In addition, you also need to actually live in the state of residence more than 183 days per year.  If a second home or property is located in another state it is best to own the property in a limited liability company to avoid costly and time consuming probate.  Many states have budget problems and estate tax dollars could partially reduce the problem.

Retirement is a complex topic that goes well beyond selecting a tax friendly state in a warm climate.  This “where to retire” series will pivot in the coming months to “the road to retire” as we address much broader issues:

–          The transition from corporate career or business owner to retirement

–          Second careers

–          Volunteer opportunities for retirees

–          Teaching opportunities for retirees

–          Home health care providers for retirees or their parents

–          Physical and mental health

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