Great question! Many factors should be considered when deciding where to $pend your retirement years.
As we always recommend, you should measure twice ... and cut once.
If you are already close to friends and family, you may not want or need to move.
Unfortunately, it is difficult to maintain your desired standard of living in some states after you retire.
This is just an economic reality.
Health care costs and tax laws can quickly take their toll on your nest egg.
A recent Kiplinger article, titled “10 Best States for Retirement,” rated all 50 states based on "affordability" factors.
What criteria did it consider?
In addition to lower health care costs and lower taxes on retired individuals, the rankings considered the economy of the state, the overall health of the population and the prosperity of individuals over age 65.
So what are results?
The state has affordable health care and does not impose a state tax on Social Security benefits, enabling you to stretch your retirement income.
When you pass away, your assets will not be subject to a state inheritance or estate tax—another financial bonus.
Why not a higher ranking?
Idaho has a state income tax ceiling as high as 7.4% and a sales tax of 6%.
When you think of retirement states, Arizona probably comes to mind.
This is partially because the state is "tax friendly" for retirees. Arizona has a relatively modest income tax rate and does not collect this tax from Social Security benefits and some other forms of retirement income.
A benefit for estate planning is the lack of an inheritance or estate tax.
One downside is living expenses tend to be a higher than average; however, in the Prescott, you will find an abundance of potential friends your own age.
Another popular state for retirement, Florida has no tax on retirement income, including social security.
An added benefit?
According to a recent report from George Mason University, Florida ranks fifth in the country for fiscal soundness, giving it a sunny disposition.
This is a tax friendly state with plenty of activities for your own enrichment.
Although the state gets 36 inches of rain per year, areas like Spokane average about half of this amount.
Bring an umbrella.
6. South Carolina.
In addition to being tax friendly (there are generous exemptions on certain kinds of retirement income and no tax on Social Security, inheritance or your estate), the cost of living is significantly below average.
Add very low property taxes, and you have a state where one can easily stretch a fixed retirement income.
Alabama has some great financial benefits with health care costing 4.5% less for the average retired American couple and income tax rates ranging from just 2% to 5% (Social Security is exempt).
In addition to affordability, Alabama provides retirees with warm weather, good beaches, and plenty of golf.
Definitely a hole-in-one.
Tennessee is the eighth most fiscally sound state, according to the George Mason report.
Having no state income tax automatically protects your Social Security benefits.
Low cost of living—health care and taxes included—in all major metropolitan areas make Tennessee a financially responsible choice.
Definitely a Graceland for your bank account.
Georgia is ranked among the top 10 states for retired couples and the top ten states for taxes on retirees.
With affordable health care and warm weather, the Peach State should be considered.
Meanwhile on the other side of the country, Utah boasts a low cost of living and a healthy population. In fact, according to the United Health Foundation, Utah ranks fifth in the U.S. for the overall health of population age 65 and older.
The greatest strike against Utah?
It taxes Social Security.
How salty of them.
1. South Dakota.
South Dakota is more than affordable with low health care costs and living expenses.
This state ranks in the top ten for taxes on retirees and has two cities in the Milken Institute ranking for the five best small metro areas for successful aging with Rapid City at five and Sioux Falls at two.
Finally, South Dakota ranks third in fiscal soundness, according to George Mason.
In addition to low living expenses and health care costs, it’s one the 10 best states for taxes on retirees.
Although these rankings consider quantifiable factors, no mere statistic should predict your future retirement happiness.
Personal interests and relationships are important as well. As such, you will want visits to and from family and friends to be a priority.
No matter where you move, you will need to update to estate plan to reflect the laws in your new home state.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (June 2016) “10 Best States for Retirement”