When you think about your ideal retirement, does ‘where’ rank high on your list of considerations? For many retirees, close connection to family may result in staying put, focusing instead on vacationing elsewhere rather than making a permanent move. But what about the family that is scattered around the country, or even around the world? The reasons for staying where career and family once required begin to shift. So how does one decide where to relocate for a dreamy retirement?
Naturally, climate, activities, and proximity to health care may be big factors. Somewhere on the list, you’re likely to consider the financial consequences of a move. So which states offer the most financial advantages for retirees, and how might those advantages impact your planning?
For starters, there are seven states that don’t tax personal income (or investment income). Those states are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming (Note: Tennessee and New Hampshire also have no income tax, but residents pay taxes on dividends and investment income). That might be a good list to start with; however, there are a lot more financial factors to consider than just income taxes. What of all the other taxes a retiree pays, such as property and sales taxes? Further, one should consider the cost of living in these areas. Let’s look at an example, shall we?
If Alaska caught your eye because of their lack of an income tax (and spectacular scenery), you may want to take a closer look. In Genworth Financial’s 12th annual cost of long term care study, Alaska ranked as top on the list for highest cost of care. An annual stay in an Alaskan private room in a nursing facility averages $281,415…per year. Wow. Toward the other end of the spectrum, you’ll find Texas at $68,620 and Tennessee at $70,080. When combined with their lack of an income tax, Texas begins to look pretty attractive. For comparison, Ohio’s annual long term care cost is $91,250.
When you consider that the various tax rates are a function of income, value of property, estate size, spending patterns, and on and on, you can see the challenge of picking the ‘cheapest state’ to retire to. In fact, writing this article had me sifting through and comparing various ‘Best Of’ lists to narrow it down. That’s not easy, nor is it realistic for me to do it in a way that appeals to everyone.
In light of the work that’s already been done for you by others, here are several lists that can help you focus in on the factors that are most important to you when choosing your retirement destination:
10 Best States For Retirement:
10 Most Tax-Friendly States For Retirees:
15 Cheapest States For Long Term Care Costs:
23 Cheap Places To Retire In The U.S.:
So, while moving to another state for retirement isn’t everyone’s dream, many have a clean slate with which to work. Why not use retirement as an opportunity to venture out and try new things? As a new chapter unfolds, consider writing your story, your way.
All the best,
Adam Cufr, RICP®
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