States You May Want to Consider When Retiring
Many retirees these days are struggling to live on fixed incomes in an economy where everything seems to cost more than most people can afford. Struggling retirees may find some comfort by changing the state that they live in. Some states are very tax friendly and much more affordable to retirees.
At the top of the tax friendly states is Alaska. Alaska does not charge any state income tax for their citizens. Also all citizens living in Alaska for at least one year actually get a dividend;from the states oil sales. Property taxes for the average citizen in Alaska can be a bit on the high side but if you are 65 years or older, Alaska is one of the states that does not allow Social Security income to be taxed. There is also no state wide sales tax there. Although property taxes can be a bit high but if you are over 65 years of age you are exempt from paying sales tax on the first $150,000 on the assessed value of your home.
Those who retire in Nevada or even live in Nevada at all get a great advantage when it comes to taxes because of all the gambling in the state. Because of their high rate of tourism and income from that the residents there do not have to pay any income tax. This can benefit retirees because your social security income is not taxed and neither is any of the money you make from investments such as IRA distributions. Residents do pay property taxes there but those are very low because you only pay based on 35% of the value of your home. The only downfall of moving to Nevada is that the sales tax is currently 8% for most things. But if you live in higher tax states such as Illinois you are paying that already, so while that 8% is on the higher side it at least comes from a state where the rest of the taxes are really low or non existent.
Like Alaska the state of Wyoming makes a lot of money because of their income from oil sales. So residents of Wyoming do not have to pay state income taxes.For retirees that means your SS benefits will not be taxed. They also have a low sales tax which is 4% to 6% depending on what country you live in. One of the biggest advantages to living in Wyoming are the super lower property taxes. They pay only 9.5% of the value of their homes.
While not as fantastically retirement friendly as the first three states on the list there are some significant advantages to retiring in Mississippi. Mississippi starts out by not allowing Social Security income to be taxed so you get to keep all of your Social Security income, They go a step further by not allowing other income by retirees such as income from annuities, pensions, 401K distributions to not be charged any state income tax. Property taxes are only based about 10% of the homes assessed value and residents over 65 are exempt from paying taxes on the first $75,000 on their homes.
Georgia is already a pretty good state to retire in but they working to make it better. They are currently working on eliminating all income tax on all forms of retirement income, they are not quite there yet, but hope to be by 2016. Currently residents of Georgia who are between 62 ad 64 years of age do not have to pay state taxes on the first $35,000 per income they make and if you are over 65 you don't have to pay state taxes on income up to the first $65,000 of the income you make on any type retirement income and that includes income from rental properties. Over all the state sales taxes are low but certain counties are allowed to raise their sales tax by up to 4% higher than the state average which can make those areas have sales taxes that average to higher than average for the country. While you will get to keep more of your retirement income in Georgia you will not save much in the way of property taxes however as average property taxes rates are a bit on the high side compared to other nearby states.
Other states that exempt retirees from paying state income taxes on Social Security Income are:
Pennsylvania (this state has a low flat income tax rate of 3.07% for all)
I have to give an honorable mention to Delaware, while the don't completely exempt state taxes on retirement income their rates are low and you don't have to pay on your first $12,000 of retirement income if you are of retirement age, Real estate taxes are very low, and the state boasts no sales taxes.