States with the Lowest Tax Burden for Retirees

Planning for retirement involves more than just saving money—choosing a tax-friendly state can significantly impact your financial well-being. States with low or no income tax, affordable property taxes, and exemptions on retirement income can help retirees stretch their savings further. Here are some of the most tax-friendly states for retirees:

Florida

Florida is a popular destination for retirees due to its lack of state income tax, including no taxes on Social Security benefits, pensions, or other forms of retirement income. The state also has no estate or inheritance tax, making it a favorable choice for those looking to preserve their wealth for the next generation.

Wyoming

Wyoming is another state with no state income tax and low property taxes. Retirees benefit from no taxes on retirement income, and the state’s overall cost of living is lower than the national average, making it an attractive option for those seeking a quieter, rural retirement.

Tennessee

Tennessee does not tax wages or retirement income and has low property taxes. While it does have a tax on interest and dividend income, this is being phased out by 2021. Retirees can enjoy a lower overall tax burden while living in a state with a mild climate and a vibrant cultural scene.

Nevada

Nevada offers no state income tax, making it a good option for retirees with various income sources. Property taxes are also relatively low, and there’s no tax on Social Security benefits, pensions, or retirement accounts, making Nevada a tax haven for retirees.

South Dakota

South Dakota has no state income tax and offers low property taxes. There are no taxes on Social Security or other forms of retirement income, and the state’s cost of living is moderate, making it a practical choice for those looking to maximize their retirement savings.

Delaware

Delaware offers low property taxes and no state sales tax. The state provides exclusions for certain retirement income, such as pensions and IRA distributions, making it an affordable option for retirees who want to stay on the East Coast without the high costs associated with neighboring states.

New Hampshire

New Hampshire does not tax income or retirement distributions, although it does tax interest and dividend income. Property taxes are higher, but the absence of a broad-based state income or sales tax makes it a good option for retirees with substantial retirement income but few tangible assets.

Alaska

Alaska offers residents a Permanent Fund Dividend, which can provide additional income to retirees. With no state income tax, no state sales tax, and moderate property taxes, Alaska is a tax-friendly option for retirees who can handle its colder climate.

Tips for Choosing a Tax-Friendly State for Retirement

• Evaluate Income Sources: Consider the types of income you will receive in retirement—Social Security, pensions, 401(k) or IRA distributions—and how they are taxed in potential states.
• Consider Property and Sales Taxes: Low income tax states may have high property or sales taxes. Evaluate the overall tax burden, not just income tax rates.
• Health Care Costs: Factor in the cost and availability of healthcare services, as this can significantly impact your retirement budget.
• Lifestyle Preferences: Beyond taxes, consider the climate, community amenities, and proximity to family and friends when choosing a retirement destination.

Selecting the right state can help you make the most of your retirement savings and ensure a comfortable and fulfilling retirement.