These states tax retirement income the least.
Ever wonder why so many people retire in Florida? It’s not just the tropical weather and sandy beaches — Uncle Sam keeps his greedy hands off their retirement benefits too.
Florida is just one of seven states that do not tax retirement income, says a study from Wolter Kluwers Tax & Accounting, a tax software organization.
The other six are…
- South Dakota
“How much of your retirement income goes to taxes depends not just on how much income your nest egg earns, but also on where you choose to live,” the study says. “A little pre-retirement homework on state tax treatments of retirement benefits and other financial factors can be a key step in deciding where to establish new, post-career roots.”
The best retirement cities
Debt.com has previously reported that Florida is the best state to retire, and four cities in Florida made the top 20 of U.S. News & World Report’s 100 Best Places to Retire List. Sarasota, FL made No. 1 based off overall housing affordability, healthcare and residents’ overall happiness, according to the study.
The average housing costs in Sarasota this year are $224,440, compared to the national average of $211,704, says U.S. News. The average annual salary is $40,600 and average monthly rent is $991. And the weather ranges from 63 degrees in the winter time to 82 degrees in the summer.
San Antonio, Texas, another state with zero tax on retirement income, came in at No. 3 on U.S. News’s list. Housing costs are $187,485, the average annual salary is $43,740, and average monthly rent is $879. The weather gets a little colder, though, at 53 degrees in the winter and 84 degrees in the summer.
Texas has six cities to make U.S. News’s top 20 of the 100 Best Places to Retire List.
What it costs to retire
Some say you should save 10-12 times your current income, or to put an actual dollar range, you should save $1 million-$1.5 million, according to AARP. About 10,000 people turn 65 on a daily basis in the U.S., and the average retirement age is 63, while life expectancy is up to 85, according to GOBankingRates.
The personal finance site ran an interesting study to find the states where you can stretch $1 million over retirement for the longest amount of time. Based off each state’s groceries, housing, utilities, transportation and healthcare costs, they determined where $1 million lasts the longest.
If you try to retire in Hawaii off $1 million, you’d only make it 11 years, leaving almost another 12 years to live, on average. Housing would cost you $46,478, and the cost of groceries is the highest in the U.S. at $5,626 a year. The most affordable state to stretch $1 million over retirement is Mississippi. You can make it your full expected retirement, and then some — at 26 years.
Mississippi is the cheapest state in the U.S., and it also has the lowest housing costs. You’d only need $37,964 to make it through a whole year.
The other four best states to stretch $1 million over retirement are…
- Arkansas: 25 years and six months
- Oklahoma: 25 years and two months
- Michigan: 25 years
- Tennessee: 25 years
Of course, GoBankingRates’ study doesn’t mention how much these states tax on retirement income, or if these are the kind of states people desire to retire in — but it’s worth knowing where you have the best chances to make it a full retirement.
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Article last modified on April 17, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: The Best States to Live Out Your Retirement - AMP.