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Best Retirement States

When it comes time to retire, many people consider relocating. In this article, we cover the best retirement states you might want to take a look at.

There are some States that have gained a reputation as havens for retirement. In most cases, the reason for this is mild weather. The idea of moving to Florida after a life time of battling the harsh winters of the north is part of our popular concept of what the retirement years should entail. Other warm States like Arizona and California are also thought of as ideal for retirement living. The beach and other recreational activities are thought of as good selling points also.

From a financial point of view, certain States are considered good retirement States also. The usual criteria here is not weather or activities. It is usually State income tax. It is a common perception that the best retirement States are the ones that do not have a State income tax. It is a mistake to narrow down the taxation picture to simply income tax, however. The fact is that many of the States that have no State income tax have exceptionally high personal property taxes or sales tax. These other taxes end up amounting to more than what is paid in income tax elsewhere.

The way to evaluate the best retirement States from a financial point of view is to make a spread sheet that lists an equivalent comparison of not just the income tax, but also the average cost of living, the property tax on an average home, and the sales tax.  It is really a combination of all of these factors that will determine which State is really the best financial deal for retirement.

It might come as a surprise, but when a spread sheet like this is prepared, the small State of Delaware comes in a very high first place. The fact that Delaware is a tax haven is something that has been known in the business world for a long time. It is why so many Corporations make their home there. Alaska comes in a rather distant second. Rather surprisingly the states that are thought of as retirement Mecca’s find themselves listed in the middle of the pack. Other States that have no income tax actually find themselves at or near the bottom of the list because of their high property taxes.

Some States that do have income taxes make exemptions for retirement based income such as IRA distributions and annuity payouts. There are a lot of factors that go into the evaluation of a place to retire. Good weather and recreational activities might offset a slightly higher cost of living to many people, and the proximity of family and friends is an important factor. Cost of living and taxation is just another factor. When these areas are considered, you need to make sure you are using the sound principles of financial management. The place to find your information is not a travel brochure from the State’s tourist bureau. Ultimately, the best retirement State is the one where you are going to be able to find your own dream retirement and where you can afford it.

If you would like to discuss your retirement planning options or have questions, please contact us.

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