Retirees Are Flocking to These 3 States - and Fleeing These 3 States in Droves

[Conan]

I wouldn't put too much emphasis on the state income tax question. State income taxes even for higher earners in high-tax states max out at about 5% of total income--not necessarily a deal-breaker.
The big ticket items are housing costs (what you're selling, net of commissions and moving costs, vs. the purchase price in the new place), and real estate tax.

I'm more concerned about culture, climate, and quality of medical services (if there even is such a thing as quality medical these days).

Culture:

https://blogs.sas.com/content/sastraining/2016/01/20/11279/

Climate:

https://en.wikipedia.org/wiki/Climate_of_the_United_States

Medical Services:

https://www.ahrq.gov/research/findings/nhqrdr/nhqdr16/overview.html

 

[WinniWoman]

I think state taxes are a BIG issue. In NY, besides the oppressive property and school taxes and sales taxes and regulations, having your retirement income taxed after $20,000 is a big deal for people without pensions and who will not be taking SS until age 70, or a couple for which maybe one person passes and you have only one SS check.

I do agree about housing costs and property/school taxes needing to be affordable for sure, but hard to find.

There are plenty of areas in the states without income taxes that have a wonderful quality of living- cultural and outdoor recreation and so forth, weather, and also good medical care. (I agree good medical care is subjective).

For many people like myself it is really hard to find a place that has it all for what you are looking for.

 

[bnoble]

Local culture, amenities, and maybe weather will trump taxes for me, but I'm also in a position where that is possible. In general, I find that areas with more significant tax obligations also have social and government policies that I am more than willing to support.

 

[bogey21]

I am not sure it will even matter in the area we are in. There are new houses going up and I am sure buyers will want those over ours. Hopefully I am wrong.

I'm sure it depends on where you live but I just sold my Son's 40 year old house in Fort Worth for him. It was not in the greatest shape in the world. I thought he would get $175 thousand for it. RE Agent insisted we list for $190,000 thousand. It sold for the $190,000...

George

 

[bogey21]

I know we will probably have to have it professionally appraised and we might even decide to sell it ourselves to save on realtor commissions.

Based on selling my Son's house I have two observations here. First, a good RE Agent will probably give you as good a valuation as a professional appraiser. And second in his case paying a RE Agent quickly got the deal done (time is money). Surprisingly it was the Buyer's Agent who was the driving force in getting the deal done. He wanted his half of the commission...

George

 

[VacationForever]

I wouldn't put too much emphasis on the state income tax question. State income taxes even for higher earners in high-tax states max out at about 5% of total income--not necessarily a deal-breaker.

California's income tax rate is 13.3% at the highest bracket. If you don't make that much, you are still looking at about 8%. I did a back of a napkin calculation and with our move to a state without income tax, we save about $14K a year. Our quality of life is great where you can pretty much golf all year and have the best doctors that we ever had.

 

[Conan]

I think state taxes are a BIG issue. In NY, ... having your retirement income taxed after $20,000 is a big deal for people without pensions and who will not be taking SS until age 70, or a couple for which maybe one person passes and you have only one SS check.

Apparently Social Security is entirely exempt in New York State, apart from the $20,000 exclusion.
https://www.tax.ny.gov/pit/file/information_for_seniors.htm

So if you have, say, $40,000 of social security, $40,000 of private pension/IRA, and $20,000 of interest and dividends, then
Federal AGI
40,000 * 85% + $40,000 + $20,000 = $94,000

New York AGI
$94,000 - 40,000 * 85% - $20,000 = $40,000

New York standard deduction
~ $16,000 (married or qualifying widow)

New York taxable income
~ $24,000

New York income tax
~ $1,000

 

[WinniWoman]

Based on selling my Son's house I have two observations here. First, a good RE Agent will probably give you as good a valuation as a professional appraiser. And second in his case paying a RE Agent quickly got the deal done (time is money). Surprisingly it was the Buyer's Agent who was the driving force in getting the deal done. He wanted his half of the commission...

George

Yes. Agree. I already told the real estate agent that is coming tomorrow that I distrust real estate agents. LOL!

When we sold my parents house I interviewed 3 agents and chose a "team" of two guys that were awesome. But I did tell them I did not want a haggling situation. To just list the house at what it can actually sell for and be done with it. They already new of a buyers agent who's client was looking for something like it (was a relative of her) 1st day on the market- sold for cash. Had another 1 or 2 offers also.

That said, we had to spend a ton of (my parent's)money after the inspection to get things up to code and current standards.

I will interview a couple of more agents before the year is up. We might list with one of them. we just don't want a 6 month contract and they all seem to want that. Also- hard to negotiate commissions with these people.

Depending, we will try to sell ourselves I guess. I am reading a book right now on how to do that.

 

[WinniWoman]

Apparently Social Security is entirely exempt in New York State, apart from the $20,000 exclusion.
https://www.tax.ny.gov/pit/file/information_for_seniors.htm

So if you have, say, $40,000 of social security, $40,000 of private pension, and $20,000 of interest and dividends, then
Federal AGI
40,000 * 85% + $40,000 + $20,000 = $94,000

New York AGI
$94,000 - 40,000 * 85% - $20,000 = $40,000

New York standard deduction
~ $16,000 (married or qualifying widow)

New York taxable income
~ $24,000

New York income tax
~ $1,000

Yes. I know.

The $20,000 exclusion is for other retirement income from what I understand. SS is tax free.

We have no pensions, so income has to come out of savings and IRA's/401k eventually. Plus our Roth conversions we start next year. (Standard deduction for us is now $24,000 Federal).

I did say in a prior post NY is not that horrible in this regard, but even in your example $1000 adds up when you consider the property and school taxes also going up every single year. Thankfully our home has been paid off a very long time, so at least no mortgage.

Major maintenance for our house, though, is not something we want to continue with as we age and we do not want the total isolation. I won't even talk about what else is going on here in our local tri-counties as it would get political.

Culturally our mindset is like the West or even the South according to your map, but we also have a lot of "Yankee" in us being born and bred in NY. We of course, are used to certain things that we have here that are not elsewhere. Especially in the South- I remember being in Florida and thinking I could not take how slow everyone was. Like the cashiers in the supermarkets, for example. LOL!

I really want a 55 + community type living or something like it.. I am determined.... LOL!

 

[Conan]

California's income tax rate is 13.3% at the highest bracket. If you don't make that much, you are still looking at about 8%. I did a back of a napkin calculation and with our move to a state without income tax, we save about $14K a year. Our quality of life is great where you can pretty much golf all year and have the best doctors that we ever had.

If the calculator here is correct, https://www.irscalculators.com/tax-calculator, the California income tax on the same example I gave above ($40,000 exempt social security, $60,000 pension/IRA/other income) is less than $1,250 for a married couple.

 

[WinniWoman]

I guess it is all a matter of what you think is a lot of money. I think taxes are extortion anyway so even $1 is too much for me.

That said- you can't avoid them altogether one way or another no matter where you live.

BTW- that is a really cool tool! Thanks!

 

[Sugarcubesea]

This discussion brought me back to this tool. It helps a lot in the decision making process of where to retire based on taxes, especially if you are retiring. For ex: North Carolina is popular for people in NY to retire to, yet you can see it is not tax friendly at all. My coworker who moved to Alabama from there said that one reason they left is that her retired cop husband's pension was taxed there. They did not know it would be when they moved there. She said North Carolina is a beautiful state and commented I would like Wilmington, but I will not go to a state that taxes retirement income(thankfully they at least do not tax SS). NC has a flat tax on IRAs, pensions and 401k's.

She said Alabama so far is wonderful. Very inexpensive- their house cost just $117,000 and is walkable to the historic district of Gadsden, which they like. It doesn't tax most pensions, but there is a tax on other retirement income. But it is still overall tax friendly.

Property taxes on the list are way understated for New York. For a median house of $286,000, the property taxes would definitely be double the $4000 stated. I know. I own such a house and pay close to $10,000 and I do not know anyone in NY who pays only $4000 in property taxes- even way in upstate New York. A lot of these lists never seem to include school taxes, or at least it is unclear if school taxes are included in the numbers. (In NY we get 2 separate bills for taxes- 1 for school in Sept and 1 for property in January)

This tool does not, however, take housing costs, weather, medical access, cultural and recreation activities and crime, into consideration. And people still have family and social considerations, but still I think it puts a lot into perspective- at least for me.

https://www.kiplinger.com/tool/reti...by-state-guide-to-taxes-on-retirees/index.php

Thanks for providing this tool. I’m going to be using it.

 

[Luanne]

I could never leave my grandchildren. who are all within 85 miles of our home. After 40 years in the same house, I would have a tough time leaving it. We live in only a few rooms of our house and keep the other rooms closed up, mostly so our long-haired cat doesn't leave hair in more places. I cannot keep up with the cat hair as it is.

We don't have grandchildren. Maybe if we did I'd feel differently. But, question for you, if those families moved farther away would you move to be closer?

 

[Passepartout]

We don't have grandchildren. Maybe if we did I'd feel differently. But, question for you, if those families moved farther away would you move to be closer?

Our kids and grands all left us. And airplanes fly every hour. We aren't moving to the urban areas where they chose to live/work. I can totally understand. They are into technology and earn tons of money, but I couldn't live in the urban area where they do.

 

[WinniWoman]

We don't have grandchildren. Maybe if we did I'd feel differently. But, question for you, if those families moved farther away would you move to be closer?

Our son is not married and we have no grandchildren or other children for that matter. To answer your question- NO- we would not follow our son or his family if he had one.

That said, we do want to make our retirement move near to where he lives, but we are also exploring other options.

We actually really like the state he lives in and our timeshare is there also. Our other timeshare is in the state right next to that and we really love the New England area.

As to what Jim said, I would really hate to have to get on a plane to visit him because we really hate flying, not to mention the expense of it, (and for us that would involve lodging also and meals out as our son right now lives in a studio apartment AND- we can't assume if he was married his spouse would be crazy about us plopping down with them for an entire week or more even if he did have a big home), so I guess he would have to be the one to fly to us if we lived far away- not that he could afford it right now. Then if he had a family it would get even more expensive for him. And we know what that means- no visits. Also, the families get more busy as the kids grow. I have seen this happen with my cousin here in NY and her family, whom live in California.

I do sometimes feel kind of bad when I see how people I know have a lot more contact with their kids and grand kids that live nearby. Especially during holidays and birthdays. Some of it I think is way too much- like all the babysitting- ugh- but it is the little things I envy. They go to the grand kids plays and ball games. They see their kids for all their birthdays, maybe a barbecue, etc. Would be nice if-let's say, our son would live close- maybe he would call my husband to take a look at a car problem or maybe stop in to say hello for a minute or if he needs to borrow something. Possibly take him to lunch once in a long while or we could stop by the brewery he works at to have a drink. Things like that. The day to day little things we do not experience.

Like people ask us what are we doing for Easter. Ummm well- nothing. We barely know it is Easter. We haven’t seen our son on his birthday in many years- even the milestone ones like 30. And he has not seen us on ours. ( not sure if HE cares. lol!) Like my husband just turned 65. We have nothing going on. You get the picture.

Soooo.....I do hope we can move near our son- even just to see him once in a great while for 5 minutes. Makes the XMAS and Thanksgiving holidays easier also. And we wouldn’t have to give up our timeshares.

 

[TravelTime]

I wouldn't put too much emphasis on the state income tax question. State income taxes even for higher earners in high-tax states max out at about 5% of total income--not necessarily a deal-breaker.
The big ticket items are housing costs (what you're selling, net of commissions and moving costs, vs. the purchase price in the new place), and real estate tax.

I'm more concerned about culture, climate, and quality of medical services (if there even is such a thing as quality medical these days).

Culture:

https://blogs.sas.com/content/sastraining/2016/01/20/11279/

Climate:

https://en.wikipedia.org/wiki/Climate_of_the_United_States

Medical Services:

 

[TravelTime]

Not sure how you got to 5%. In California, the average person pays 9-10% in state income tax since it is pretty easy to get there. And many of us reach the 13% level too.

 

[Luanne]

Our son is not married and we have no grandchildren or other children for that matter. To answer your question- NO- we would not follow our son or his family if he had one.

I was actually asking Cindy.

 

[bbodb1]

Local culture, amenities, and maybe weather will trump taxes for me, but I'm also in a position where that is possible. In general, I find that areas with more significant tax obligations also have social and government policies that I am more than willing to support.

BNoble,

It is interesting you make this point and I will admit my first reaction (especially to the bolded part) was disagreement. I don't see a strong correlation (again referring to the bolded statement) that you do.
BUT - I do appreciate areas that have a sound development plan and execute them well. If the taxes are high (or higher) in those areas, I can at least see tangible benefits to the tax burden and would likely be more tolerant of a higher tax burden.

From our days in Minnesota, I recall higher taxes (especially compared to that we experience in Arkansas) BUT in Minnesota, the community we lived in had an excellent plan for developing neighborhood parks and maintaining wetlands - and executed it, which really helped develop a neighborhood feel. In Arkansas, not so much so - at least in the areas I am familiar with.

 

[WinniWoman]

I was actually asking Cindy.

Sorry. Thought it was a general question

 

[Luanne]

Sorry. Thought it was a general question

It kind of was. I'm interested in everyone's input. Cindy just stated that she wouldn't leave her grandchildren, and kids.

 

[klpca]

Not sure how you got to 5%. In California, the average person pays 9-10% in state income tax since it is pretty easy to get there. And many of us reach the 13% level too.

Maybe as a percentage of gross income vs taxable income. We aren't in the 13% bracket but are firmly in the 9.4% bracket, yet our overall tax on gross is somewhere between 4% and 5%. I did our taxes in March and remember looking at it at the time. For us, state tax is not life changing money and would be near the bottom of any decision on where to live.

My first priority is family and so far two kids live nearby and one lives up the coast - 5ish hours. My mom lives 5 min from us and my dad, as well as my in-laws live about 1.5-2 hrs away. At this stage of *their* lives, there's just no way that we could leave. Both my mom and dad had hospitalizations last month. Between my husband and I, all four parents are alive, healthy and in their eighties. Things are starting to happen, but since my grandparents lived to almost 100, I figure that we've just started this journey. We're stuck like a cork in a bottle and I can't see moving ever. Maybe to a different house, but we'll most likely stay pretty close to home. Good thing that we like it because it looks like we are staying.

 

[Conan]

Not sure how you got to 5%. In California, the average person pays 9-10% in state income tax since it is pretty easy to get there. And many of us reach the 13% level too.

I filled in this calculator, married filing jointly, with zero W-2, zero self-employment, zero social security, and $28,000 itemized deductions (that's the standard deduction for a married elder couple).
https://www.irscalculators.com/tax-calculator
To get a 5% overall California tax rate, I had to use unearned income of $147,000.
Federal income tax came to $17,897 = 12.17%
California income tax came to $7,359 = 5.01%
Any less than $147,000 and California income tax falls below 5%.

If I also add in say $53,000 of social security for a round number of $200,000 total income the federal income tax goes up by $10,000 while the California income tax stays the same (because California doesn't tax social security). The larger denominator causes the calculator to characterize the same $7,359 tax as = 3.68% overall rate.

 

[bnoble]

From our days in Minnesota, I recall higher taxes (especially compared to that we experience in Arkansas) BUT in Minnesota, the community we lived in had an excellent plan for developing neighborhood parks and maintaining wetlands - and executed it, which really helped develop a neighborhood feel. In Arkansas, not so much so - at least in the areas I am familiar with.

This is exactly the sort of thing I am thinking about.

 

[VacationForever]

I filled in this calculator, married filing jointly, with zero W-2, zero self-employment, zero social security, and $28,000 itemized deductions (that's the standard deduction for a married elder couple).
https://www.irscalculators.com/tax-calculator
To get a 5% overall California tax rate, I had to use unearned income of $147,000.
Federal income tax came to $17,897 = 12.17%
California income tax came to $7,359 = 5.01%
Any less than $147,000 and California income tax falls below 5%.

If I also add in say $53,000 of social security for a round number of $200,000 total income the federal income tax goes up by $10,000 while the California income tax stays the same (because California doesn't tax social security). The larger denominator causes the calculator to characterize the same $7,359 tax as = 3.68% overall rate.

I don't think this online calculator is accurate. I put in hypothetical numbers and I know that the marginal tax should be at 22%. While the box that says "Federal Income Tax" does correctly indicate 22%, at Total Tax box it shows 37%. I selected a no income tax state.

I copied and pasted below.
Marginal
Average
Amount
Federal Income Tax
22.00% (Marginal)
9.07% (Average)
$10,580.90
0.00%
0.00%
$0.00
Social Security Taxes
0.00%
0.00%
$0.00
Medicare Taxes
0.00%
0.00%
$0.00
Total Tax
37.00% (Marginal)
9.07% (Average)
$10,580.90