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Retiree Tax Havens

Retiree Tax Havens

While many retirees find time to travel, others are looking to relocate and settle down where it makes the most financial sense. Beginning in 2008, 78 million Baby Boomers started their retirement journey. The unprecedented size of this aging generation has lead to speculations regarding their impact on the economy, housing, and health care.

The average retirees of today are savvy with their money and will make informed decisions on where to settle down. According to a study done at the Pepperdine Institute, by 2030, 25% of elderly Americans are estimated to have an undergraduate degree, compared to 18.7% now and only 5% in 1965. For years retirees have been known to flock to the ‘default’ retirement state of Florida to spend their golden years. Demographic information indicates that Florida is ranked #1 in population size for ages 65 and over. The ‘Sunshine State’ provides its retirees with more than a mild climate and a leisurely lifestyle. It is no secret amongst retirees and their family members that Florida makes long-term care needs a priority.

They are at the forefront of recent trends in residential long-term care provision, which have shifted from institutionalized nursing homes to more homelike assisted living facilities. In a recent feature on Retiree Tax Havens here are some factors that might impact retirement location decisions.

Most Pension-friendly States5 Least Pension-friendly States
1. Alaska1. California
2. Florida2. Connecticut
3. Georgia3. Nebraska
4. Hawaii4. Vermont
5. Michigan5. Rhode Island
6. Mississippi 
7. NevadaStates with No Income Tax
8. New Hampshire1. Alaska
9. Pennsylvania2. Florida
10. South Dakota3. Nevada
11. Tennessee4. South Dakota
12. Texas5. Texas
13. Washington6. Washington
14. Wyoming7. Wyoming

"When people are considering a retirement relocation destination, I think most of them focus too much on income taxes," says Robert Barbetti, senior manager of JP Morgan Private Bank's Advice Lab. "I think they should definitely look at the property-tax situation. While many states might exclude some, or all, of your pension from income taxes, property taxes go on -- and often up -- year after year." Some are drawn to the states with no income tax, but that does not necessarily mean lower overall taxes. When making the decision make sure to cross check property taxes, sales taxes and other tax statistics. Extensive research by Kiplinger’s Magazine concluded that not all states are what they are cracked to be when you look at the total tax burden numbers. They rated the 50 capitals in each state hypothetically weighing in all factors from home premiums to taxable items spent over one year outside of benefits, pensions and distributions. The state that won as the best tax friendly location was Dover, Delaware. Juneau, Alaska came in second, and Frankfort, Kentucky rated third place. Surprisingly, Tallahassee, Florida was ranked #27. To compare how your state measures up under another state’s income-tax rules, see Beware of alluring ads for certified retirement communities. Do the research for home prices and the overall economy in that area before buying into these popular, strategically designed advertisements. If you own your home and have nurtured your nest egg, it may be prudent to stay put.

by Staff Writer
Published October 19, 2009
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