Top five States for Retirement

Choosing where to retire in the United States can be a daunting task. Many retirees move after retiring because they want more financial freedom, adventure, weather, etc. Regardless of the retiree’s interests, they should let the financial reasons carry more weight on their decision. Without a stable and sufficient amount of funds, how would they expect to fulfill their dreams, take their trips, and complete their bucket lists.

From the financial perspective, there are three primary things to consider when moving to a state. First, consider the tax implications to moving to this new state. You want the new state to forego taxing your retirement income. Second, make sure the area has a fairly low sales tax. Although retirees are more likely to spend less, a high sales tax still hurts the wallet. Finally, review the fringe items like disability benefits, no inheritance/estate taxes, and special retiree exemptions. Here are the top five states for retirement based on financial factors.

Wyoming – The Cowboy State

Wyoming is the best financial choice for retirees mainly because it has no state income tax whatsoever. The state’s sales tax is at 4% for most items and there is no inheritance or estate tax. Another appealing perk about this state is the property tax. Currently, property owners are only taxed on 9.5% of the market value of your home. It’s amazing how a homeowner with a $100,000 market value would pay property tax on only $9,500.

Oklahoma – The Sooner State

Similar to Wyoming, Oklahoma also has a great property tax policy. The property in the state is only taxed at about 12% of the market value. Moreover, they also have a slew of tax exemptions and property tax refund programs. Sales tax for most of Oklahoma is about 4.5% and there is also no inheritance or estate tax.  Retirees collecting social security or a federal pension are exempt from paying taxes on those funds, plus they have an additional $10,000 per person exemption on retirement income outside of those sources.

Alabama – The Yellowhammer State

Alabama wins the top prize in regards to property tax. Homeowners, age 65 and older are not subject to any state property tax. However, some cities and counties have levied their own taxes which still must be paid. The average state income tax range is between 2% and 5%, but most pension plans are exempt. It’s the company based contribution plans such as 401(k) and 403(b) plans that are usually taxable. The statewide sales tax is at 4% and there is no inheritance or estate tax.

Mississippi – The Magnolia State

Mississippi is a close second to Wyoming for retiree financial benefits. It offers all qualified retirement income exemption from state tax. Anything beyond that is capped at only 5%. Interest from federal investments like treasury bonds or bills, are also state tax free. The property tax in Mississippi is competitive as well, being at only 10%. There is no inheritance or estate tax, but there is a 7% sales tax and larger than normal 30% motor vehicle tax.

Louisiana – The Pelican State

The final state on the list is Louisiana, which offers great property tax benefits to its residents. Their property taxes are imposed only 10% of fair market value with plenty of homestead exemptions. All social security, military, and government pensions are exempt from state income taxes. If the retiree is over 65, they can exclude another $6,000 a year in taxes from other income. Not only is the state’s normal income tax low, but state sales tax is only at 4%. Louisiana has no inheritance or estate tax, but they do have an estate transfer tax on all amounts exceeding $60,000.