Ok, so you’ve seen lists of the best states to retire in many times before, but each list is based on a set of given principles. Principles that don’t necessarily apply to every person looking for a place to retire. For example, most lists use crime rate to determine if a state makes a good retirement choice, but if you’re going to move to a state, I’m guessing you’ll be able to pick a location with low crime and that it shouldn’t really affect your choice of location. Because we don’t really agree with the way other lists are computed, we’ve come up with our own approach of ranking the best states to retire. We simply pick an important factor to consider during retirement and then find the top states that meet that criteria. Sounds simple enough but it actually takes quite a bit of research and opinion to quantify which states are really the best. If you’re looking for a place to retire, look at the factors below that are important to you. If one or two states come up on several criteria, then you may want to consider them in your quest to find the best place to retire.
Top States to Retire Based on Taxes
Picking the states with the lowest taxes isn’t as easy as it sounds. That’s because you pay taxes on everything you earn or spend, including income tax, sales tax, property tax and fuel tax. If you’re retired, and depending on your lifestyle, the taxes that might have the biggest impact on you are real estate taxes, sales taxes, and perhaps tax deductions to social security earnings, as most retirees recieve a significant amount of income from social security. Just remember that every state is going to their tax money, but they all go about it slightly different. Find a state that will minimize your individual taxes. For example, if you spend a lot of money, then look for a state with low sales tax. If you buy expensive homes, look for a state with low property taxes. If you have a lot of dividend income, look for a state with low state income taxes or dividend taxes. With all of these taxes in mind, here are some of our findings on the states with the best taxes to retire.
States With Low Sales Tax
Sales tax is the tax you pay each time you buy something. Oregon, New Hampshire and Montana have no sales tax. Alska has about 1% in sales tax. The next states with the lowest sales tax rates are Hawaii (4.35%), Maine (5%), Virginia (5%), Wyoming (5.17%) and South Dakota (5.22%). The top three states have rates as high as 9% and include California, Arizona and Tennessee.
States With Low State Income Tax
State income tax still matters when you’re retired because you still have taxable income in the form of IRA withdrawals, pensions and social security income. If your income is going to be high during retirement, than choose one of these states to minimize your state income taxes. State income taxes are zero percent in Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee only apply income tax to income from interest and dividends.
States That Deduct Social Security Income From Their Taxes
Quite a few states let you deduct any social security earnings from your tax base. In other words, you don’t have to pay state taxes on your social security income in these states: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin.
States With The Lowest Property Taxes
If you’re retired and your house is paid for, then you have no mortgage and your biggest annual expense on your house will likely be property taxes. The property tax rates by state vary dramatically, with high taxes in states like Texas and Wisconsin that are almost ten times as high (as a percent of home value) as the states with the lowest property taxes. According to the Tax Foundation, the states with the lowest property tax rates (% tax of home value is in parenthesis) are Louisiana (0.18%), Hawaii (0.26%), Alabama (0.33%), Delaware (0.43%), West Virginia (0.49%), South Carolina (0.50%), Arkansas (0.52%), Mississippi (0.52%), New Mexico (0.55%) and Wyoming (0.58%).
Best States to Retire in Based on Weather
There’s a reason that old people constantly talk about the weather. That’s because it’s important to have good weather when you’re retired and have all day to enjoy it. For that reason, weather really does matter when choosing the state you want to retire in. Furthermore, cold weather climates make it much more difficult to get out and about as we age. The difference between living in a moderate versus col climate can make a bid difference in how active we can keep our lifestyles and the amount of exercise we can get each day. We understand that everyone prefers a different climate, so here are some of the different climates and the most popular states that have them.
Cold Weather States
Many people still prefer to have all four seasons, or lots of outdoor activities to participate in. There are lots of cold weather states that have ample sunshine and lots of stuff to do. Colorado for example, because they are next to the mountains, they have rather mild winters and lots of sunshine, but great access to hiking and skiing. Montana and Wyoming are similar, with lots of outdoor activities and sparsely populated areas to retire. If you like city life, New York can’t be beat for its atmosphere and available entertainment. Minneapolis is a cold weather state but the entire downtown has been designed with skywalks so that you barely have to step outside to get where you want to go.
Tropical Weather States
Hawaii and Florida top these lists. Hawaii is expensive for retirees because everything has to be shipped to the island, but it sure offers tropical weather. Florida also has tropical weather, but is quite a bit more humid in the summers.
Hot and Humid States
Most of the Southeast US is considered hot and humid. States include Georgia, Mississipi, Alabama, Louisiana and Texas. These states are extremely hot in the summer and very mild in the winter.
Hot But Dry States
The Southwest states have become very popular retirement destinations because of the year round warmth and the dry, dessert heat. These states include Arizona and New Mexico. They also offer lots of retirement housing and RV resorts.
Good Retirement States Based on A Low Cost of Living
Cost of living is a measure of how much “everything” costs in a specific area. It takes into account home values, the cost of food at grocery stores, insurance rates, taxes and everything into one figure. It is based solely on how much it costs to live somewhere, and has nothing to do with how good of a place it is to live. With that said, the top ten states with the lowest cost of living, according to CNBC, are Oklahoma, Tennessee, Arkansas, Kentucky, Kansas, Nebraska, South Dakota, Texas, Georgia and Missouri.
So, now that you’ve sorted through all of these statistics and opinions about which state is the best state to retire in, have you made an opinion? From all of our research, our opinion is that Texas and Florida offer the best weather, lowest taxes and very reasonable costs of living. However, in our opinion, there is a lot more to think about when choosing a place to retire. The main factor being family. You’ll want to live where your family is so that you can be close to your children and get to know your grandchildren. For that reason, the ultimate goal would be to save enough money so that you can have two homes. One in your dream climate for the winters, and one next to your family for the rest of the year.