If you plan for retirement, let me tell you, it won’t be as easy as it sounds. But one of the essential factors is figuring out if you’ll have enough savings to retire somewhere you’re satisfied with.
Determining how much retirement income you’ll be eligible for isn’t hard, but the research into tax implications in each state can be daunting. That is unless you dedicate a lot of time to research or hire an advisor with a good understanding of local and national tax law.
Your local CPAs typically specialize in the specific state they live in, so it’s best to hire one in your area. You don’t have to chase all the thoughts and procedures with new tax laws of a different state, as this could lead to penalties or even revocation of the certificate.
To save you from some trouble, we have picked up the information for the top 5 states where you can live happily after your retirement.
Alabama
There is a state income tax in Alabama, but it doesn’t include social security benefits in its taxable income calculations. That means you won’t need to pay taxes on your Social Security benefits.
Even if you relocate to Alabama before retirement, it’s a good idea not to worry too much. The state has the same marginal income tax rate as the federal income tax and for your sake, is similar to the current state-level average rates.The state has a marginal income tax structure much like the federal, with rates at 2% & 5%. Local taxes may be included in some cases.
Alaska
You might not have heard of Alaska, but it’s earned the nickname “last frontier.” One reason is that it doesn’t tax state income – which can offer significant savings. If you want to avoid taxes in another state, look no further – Alaska also doesn’t have a sales tax!
Alaskans don’t have to pay state sales tax. So instead of spending 5% here, you would pay 6% in most other states. Property taxes average around 1-2%.
If you like the cold, nature and want to live in a remote state that’s out of the way, Alaska may be worth considering. They have a yearly payout from their permanent fund dividend, so it’s worth looking into.
Arizona
Arizona has a tax-free policy for social security benefits, so you don’t have to worry about those being taxed!
If you know you’re going to retire in Arizona, you should know that their income tax rates range from 2.59% to 4.5%.
Sales tax in Massachusetts is 5.6%, and localities add 3% on top of that. Average property taxes are lower than the rest of the country.
If you relocate to Arizona ere you retire or desire to receive benefits; you will need to understand the state’s marginal tax rates. They range from 2.59% to 4.5%.
Property taxes in Florida are lower than the national average. Houses cost less here but higher costs for anything else.
Arkansas
Arkansas doesn’t tax your Social Security benefits since the state’s calculation for taxable income excludes them. You may be in one of the following tax brackets: 2%, 4.5%, 6.5%, 7% or 7.9%.
Arkansas does charge a 6.5% state sales tax and another 3% on average added by localities. The property taxes in Arkansas are below the national average.
California
Taxes in California are relatively high, but you don’t have to contend with a state income tax on your Social Security benefits. For retired pre-retirees, the tax rate will vary from 1% to 13.3%. Localities may add even more taxes or penalties.
California state sales tax is 7%, with localities adding around 1.5%. Property taxes are lower than the national average.
Although California has a high cost of living with many taxes, it’s still a popular place to live, and people spend a lot of time outdoors. Some parts of the state where you can enjoy the weather without being outside all day long.