Of all the things you’re looking forward to in retirement, the freedom from an office is probably number one. Not only will you escape the pain of a daily commute; you won’t be tied to a particular location at all. That’s great news for those of you who want to relocate to be closer to family or to enjoy a different lifestyle. And you might as well add a lower cost of living to your priority list.
In fact, many retirees discover that a move to a different state can significantly impact their overall tax burden. Some states even intentionally court retirees to move there, by offering important tax breaks for those who live on a retirement income.
For 2023, the five states considered to be the best for retirees, with regard to their individual tax structures, are:
What makes these states such a great deal for retirees? One of the primary considerations is the state income tax rate and available exclusions. Some of the above states (Alaska, New Hampshire, Florida, and Wyoming) don’t impose an income tax at all, whereas Delaware offers an exclusion of retirement income from the calculation.
Of course, states might make up that tax revenue in other ways. Sales tax is an important consideration. Some states, like Alaska, offer a very low sales tax. New Hampshire doesn’t impose a sales tax at all. And in a few states, like Florida and Wyoming, certain items like prescription drugs or groceries are exempt from the tax.
Property taxes are another important concern for your budget. New Hampshire and Alaska have higher property tax rates than other states on this list, whereas Delaware and Wyoming feature very low property taxes. Then, of course, you might consider other taxes like inheritance or estate taxes.
The bottom line is that just because a state is listed as “good” for retirees, you should still investigate each state’s individual differences in tax rules. What works for one retiree might not work as well for you, depending upon your income and how you spend money. Let’s meet to discuss your retirement destination further, and we can help you estimate the impact of taxes on your retirement income.