Considering Retiring to A New State? Consider These Facts

Pauline Haren
December 9, 2019

[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]Where you decide to retire can have a significant effect on your life. Some choose living in a state closer to their relatives, or because of the weather, but they also want to make the decision based on how it could affect their finances during retirement.

Below are a few things you will want to consider when deciding which state you will retire to.

The first thing to know is that income taxes at the state level can take a sizeable amount from savings withdrawals. Your retirement income is subject to state income taxes when they are coming from your 401(k) or IRA.

At this time, Alaska, Washington, Nevada, Wyoming, Texas, South Dakota, and Florida do not tax these earnings at the state level. If you decided to move to any one of these seven states, your withdrawals would only face taxes at the federal level. For those that have Roth IRA or Roth 401(k), there is good news as withdrawals from these accounts are not liable to taxes.

Since we covered states that do not have state income taxes, let’s mention some that have state income taxes that are considered some of the highest: Hawaii, Oregon, California, Minnesota, New Jersey, and New York.

So what if you want to move to another state that hasn’t been mentioned? Be sure to research what the state income tax rates are for the states that you are thinking about retiring to so that you have an idea as to what your income taxes will look like.

The second thing to consider is that there are some states that will tax your Social Security benefits. For many Americans, Social Security payments are the main steam of cashflow they are receiving while in retirement. If this is the only income stream you have, you will probably be eligible for exemption from federal taxes. For those that have other streams of income, such as your pension, retirement savings account, or even a side hustles, you will be liable for federal taxes on your benefits.

Now that we have that out of the way, be aware that 13 states tax Social Security benefits as well. Those states are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.

A majority of these states allow exemptions based on your income amount. The states that do not allow exemptions are Minnesota, North Dakota, Vermont, and West Virginia.

Hopefully, this knowledge will help you make your choice easier.

Lastly, keep in mind that Medicare options and coverage can be different depending on the state. The main parts of Medicare, Part A (hospital care coverage) and Part B (preventative care coverage, such as doctor visits) are the same in any state. However, Part D (prescription drug coverage) can be different depending on the state that you live in as there are states that have more options and plans of Part D than other states.

Also, if you plan to register for Medicare Advantage rather than the standard Medicare, the cost and even availability can differ from state to state.

Though you shouldn’t base your move on just financial reasons, it should be considered a big part as your retirement income is what you will be relying on during your senior years.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”36605″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]