Additional Coverage:
- 11 States That Don’t Tax Your Retirement Income (financebuzz.com)
Retirees Rejoice! 13 States Where Your Golden Years Won’t Be Taxed Away
Retirement should be about basking in the glow of your hard-earned savings, not fretting over Uncle Sam taking a chunk of your nest egg. Good news, future leisure-seekers! There are states across the U.S. that are rolling out the welcome mat for retirees by making all forms of retirement income – from your trusty 401(k) and IRA withdrawals to pensions and Social Security benefits – completely tax-free.
That’s right, we’re talking about keeping more of your money. Let’s dive into 13 states where you can potentially enjoy a stress-free financial future in retirement, along with some key considerations for each.
1. Florida: Sunshine and Savings (with a Catch)
The Sunshine State has long been a magnet for retirees, and it’s not just the warm weather and abundance of age-friendly communities. Florida boasts no state income tax, which means your Social Security, retirement account withdrawals, and pension income are all spared from state-level taxation.
However, a word to the wise: Florida’s property taxes can vary wildly by location, and the state’s susceptibility to extreme weather events can make homeowners insurance surprisingly costly, if not challenging to secure. Be sure to factor these potential expenses into your budget if you’re eyeing a move to paradise.
2. Nevada: A Winning Bet for Retirees
Looking for warm weather and a tax-friendly environment? Nevada might just be your winning hand. This desert gem also has no state income tax and leaves your Social Security, retirement account withdrawals, and pension income untouched.
To sweeten the deal, Nevada is known for having some of the lowest property tax rates in the nation, averaging around 0.50%. That’s a pretty good gamble for your retirement finances!
3. South Dakota: The Friendly Frontier for Finances
South Dakota is making a strong case for being a top retirement destination, especially when it comes to your wallet. The state levies no taxes on Social Security, retirement account withdrawals, or pensions, and it’s another state free of income tax.
Beyond the tax benefits, South Dakota also boasts a low cost of living, including housing. For example, in November, the median home sale price was significantly lower than the national average, making your retirement savings stretch further.
4. Wyoming: Wide-Open Spaces, Wide-Open Savings
Wyoming, known for its stunning natural beauty, is also a beautiful sight for retirees’ bank accounts. It’s yet another state that doesn’t tax income, and it gives your Social Security, private or public pensions, and retirement account withdrawals a pass.
You’ll also find affordable property taxes in Wyoming, with an average rate of around 0.55%, making it one of the lowest in the U.S. Time to start budgeting for those mountain views!
5. Washington: The Evergreen State of Savings
The Pacific Northwest offers more than just stunning scenery. Washington State is one of nine states with no state income tax, and it keeps its hands off your Social Security benefits, retirement withdrawals, and pension income.
Heads up, though: While you save on income taxes, you might find housing costs to be a bit steeper. The median home sale price in Washington was notably higher in November, and the average property tax rate sits around 0.88%.
6. Alaska: Cold Climate, Warm Tax Breaks
If you’re dreaming of a retirement filled with breathtaking wilderness and chilly adventures, Alaska might be calling your name. Beyond the unique lifestyle, the Last Frontier is remarkably tax-friendly for retirees. There are no taxes on Social Security, retirement account withdrawals, or private and public pensions.
Plus, Alaska has a fantastic perk for senior homeowners: if you’re 65 or older and your primary residence is in the state, you get a mandatory property tax exemption on the first $150,000 of assessed value.
7. Tennessee: Music City, Money-Saving City
Tennessee hits all the right notes for retirees when it comes to taxes. It’s another state that doesn’t tax your income, Social Security, retirement account withdrawals, or pension income.
The state also ranks among the top 15 for affordable property taxes, meaning more of your cash stays in your pocket, depending on where you settle down.
8. Texas: The Lone Star of Low Taxes (Mostly)
Everything’s bigger in Texas, including the potential for retirement savings! The Lone Star State offers no state income tax and is hands-off when it comes to taxing your Social Security, pensions, or any of your retirement withdrawals.
A word of caution: Of the states with no state income tax, Texas has the highest average property tax rate, at about 1.6%. Be sure to factor that into your budget when planning your Texan retirement.
9. Illinois: Surprising Tax-Friendliness for Retirees
While Illinois might have a reputation for higher taxes, it’s surprisingly tax-friendly for retirees. You can enjoy the full benefits of your Social Security, retirement account withdrawals, and pensions without paying state taxes on them.
However, there are other costs to consider: Illinois has a flat income tax rate of 4.95% on other income, which could impact you if you plan to work part-time. The state also has one of the highest average property tax rates in the U.S., at around 1.83%.
10. Mississippi: The Hospitality State for Retirement Income
Mississippi extends its Southern hospitality to retirees by not taxing Social Security, retirement account withdrawals, or distributions from a pension, provided the income is from a qualified retirement plan and received after reaching retirement age.
Keep in mind that Mississippi does have a 4.4% tax rate for any income over $10,000 that you might earn while living there.
11. Pennsylvania: Keystone State, Key Retirement Savings
Similar to Mississippi, Pennsylvania is a favorable choice for retirees, as it doesn’t tax Social Security, withdrawals from a retirement account, or a pension, as long as the income is from a qualified retirement plan.
Important note: Pennsylvania has specific definitions for what qualifies as a tax-exempt retirement withdrawal. It’s always a good idea to chat with a financial or tax advisor to ensure you understand all the nuances.
12. Iowa: The Hawkeye State’s New Retirement Appeal
As of January 1, 2023, Iowa has become a much more attractive destination for retirees! The state no longer taxes retirement income for residents 55 or older. This includes 401(k) withdrawals, IRA distributions, pension income, annuities, and other retirement plan payouts.
Social Security benefits were already exempt, so this new change means even more of your hard-earned money stays with you. To qualify, you need to meet the age requirement (55+), or be a surviving spouse or disabled beneficiary.
13. New Hampshire: Live Free, Retire Tax-Free (Mostly)
New Hampshire lives up to its “Live Free or Die” motto when it comes to retirement income. The state does not tax 401(k) withdrawals, IRA distributions, pension income, or Social Security benefits, making it a very favorable spot for retirees.
Adding to its appeal, New Hampshire also boasts no sales tax and relatively low property taxes compared to its New England neighbors, helping you minimize your overall tax burden.
The Bottom Line: Plan Smart, Retire Happy
Choosing your ideal retirement haven isn’t just about finding the perfect golf course or beach. Taxes – both income and property – can significantly impact your lifestyle and how far your savings will go.
Before you make any big moves, be sure to crunch the numbers, compare tax brackets, and explore tax-advantaged strategies. A little planning today can lead to a much more financially secure and enjoyable tomorrow in your dream retirement spot!
Ready to Boost Your Bank Account? Here are some universal money tips:
- Increase your income: Explore side hustles or legit ways to boost your earnings.
- Grow what you have: Understand your financial standing and consider working with a professional to maximize your wealth, especially as you approach retirement.
- Seize opportunities: Take advantage of senior benefits, discounts, and money-saving opportunities. For instance, comparing auto insurance rates could save you hundreds!
And always be on the lookout for money-wasting traps that silently drain your funds.
Read More About This Story:
- 11 States That Don’t Tax Your Retirement Income (financebuzz.com)