“Best” is a subjective term – what suits one person may not be perfect for others. However, if you’re looking to retire somewhere tax-friendly, then the problem is more black-and-white. Some states don’t have income taxes, while others spend some kind of retirement income from taxation. After you use this criterion to categorize your list of perfect retirement places down to a handful, tiebreak considerations will work, such as how much you have to spend to live in each location.
Florida has long been known as a wonderful country in retirement. It’s one of seven states with no income tax, so whether you’re funding your retirement fund through a private, federal, or state pension fund, retirement investment, or Social Security, you won’t have to share your money with the state. However, Florida’s sales tax is slightly higher than in other states. That’s 6% at the state level and local taxes could go up by 1.5%. Florida has no inheritance or inheritance tax. The climate is warm and, overall, the state’s economy is average. Forbes lists Cape Coral, Florida, among the top 10 places to retire.
Forbes also liked Austin and Abilene, Texas, naming Abilene the best retirement city in the United States in 2014. Both regions boast nice weather and a healthy economy. The cost of living in Abilene is 13% lower than the national average, so your retirement will last longer. There is no income tax in Texas, so your retirement income is safe, regardless of that source. But US News / World Report says property taxes can be a bit high in Texas, and the state’s sales tax is at a high at 6.25 percent.
If you don’t mind the cold weather, some northern climates also offer some good tax breaks in retirement. South Dakota has no income tax and its sales tax is only 4 percent. There is no inheritance tax or inheritance tax, so the fruits of your lifetime labor can pass on to your beneficiaries without the state having to do anything. Property taxes are a bit high, but South Dakota discounts properties rated at $182,358 or less for low-income homeowners 65 and older. Bankrate points out that South Dakota has the third-lowest overall tax burden in the United States. Its healthcare system is top noted and crime rates are low.
The bank called Wyoming the best state to retire in 2015. The cost of living and crime rates are low, and Wyoming does not tax income. The state sales tax is only 4 percent. There is no inheritance or inheritance tax. According to Kiplinger, low-income seniors are eligible for a refund of part of the property and sales tax they pay, as well as utilities.
Mention of honor
• Other states without an income tax are Alaska, Nevada, and Washington. • Tennessee and New Hampshire only tax income derived from interest or dividends, so if your income doesn’t come from these sources, these can be good retirement locations. • Mississippi has an income tax, but it does not tax pensions, any years, most retirement accounts, or Social Security. It provides special provisions for military pensions. It has some of the lowest property taxes in the United States, but its sales tax is high at 7 percent. • Alaska pays you to live there. Permanent residents receive dividends each year from their savings accounts – $1,884 per person in 2014. Seniors are exempt from property taxes at the city level for the first $150,000 of the value of their home.
• Military.com provides an analysis of how different states handle pensions. In most legal areas, pensions in the military are taxable. But 30 states waive disability pension payments, and Oregon waives taxes on some federal pensions.