Top 10 Worst Tax States for Retirees

[mickeyd]

Not enough space to list all 10 states, but here is what the article says about #9. Just hope that your state is not mentioned.

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Some states offer attractive tax benefits for retirees, others don’t. Kiplinger runs through the worst (or "tax hells," as the magazine bluntly states). Many are in the Northeast United States (wait, what?).

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#9 NEW JERSEY Its nickname may be the Garden State, but New Jersey is no Eden for retirees (ugh—again, Kiplinger’s, not us). The Tax Foundation says New Jersey's combined state and local tax burden is the highest in the nation, thanks in part to sky-high property taxes. We’re waiting on the results of the “Christie Effect.”

Top 10 Worst Tax States for Retirees | Advisor One

[Nords]

Good article, thanks. I miss the old Bloomberg "Wealth Management" magazine's annual issue of tax-friendly state.

I see they summarize details (but not all the states' rankings) here:
State-by-State Guide to Taxes on Retirees

[Grainiac]

Are there any calculators to help put some numbers on this? Kiplinger seems to give much weight to what degree the SS benefits are taxed, but if one is not even planning on taking SS for the first 20 years of retirement, how would that change the situation? I guess my point is, while living in a state ranked #2 worst tax hell, how much more would we have at our disposal on monthly basis if we moved to one of the top rated retirement tax heaven, when none of our income will be coming from SS or government or railroad pensions?

[steelyman]

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Originally Posted by Nords Good article, thanks. I miss the old Bloomberg "Wealth Management" magazine's annual issue of tax-friendly state. I see they summarize details (but not all the states' rankings) here: State-by-State Guide to Taxes on Retirees

Thanks for that link, lots of useful information there. I wonder if they will keep it updated as things change?

Edit: deleted a couple of sentences that I thought might start tax debates..

[RicDee]

Could you give a specific example of income and expenses including the cost to move of NJ vs. a State you would really want to live in.
And show me the true finanancial difference (savings)
Please,
Jersey Ric

[walkinwood]

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Originally Posted by RicDee Could you give a specific example of income and expenses including the cost to move of NJ vs. a State you would really want to live in. And show me the true finanancial difference (savings) Please, Jersey Ric

Try this site
Cost of Living
or this one
Cost of Living comparison calculator

[Brat]

The discussion about how Oregon taxes retirees ignores many preferences for upper-middle income (and lower) retirees 65 and older. I suppose if a retiree had income over $250,000 per year many of those have little/no impact but the solution is to live just across the river in Washington (only sales tax, non-prepared food is excluded) but buy 'stuff' in Oregon which has no sales tax and you have the best of both worlds.

Because Oregon excluded state employee retiree income from tax they were sued some years ago by other public agency retirees, the state lost the case. As a result retired public employees with benefits accrued before they changed the tax code can exclude that income from taxable income.

As an example I paid about $200 in income tax last year and we aren't low income. Mix of social security, CSRS and IRA income.

With rare exception Oregonians with assets over $1m manage to avoid inheritance tax with estate planning. Not a big deal for those in the know.

[Koolau]

I find discussions (and individual sites) devoted to state C-O-L or state taxes very interesting. But as with all such state differences, most of us learn how to "game" the system to some extent once we choose a place to live. It can be more difficult with taxes, but not impossible. We all learn to adapt to our advantage. Otherwise, we accept the differences as "worth it" for some tangible (e.g., better j*b opportunity) or some intangible (e.g., great weather) reasons.

What would be nice would be a site which would help us with specific "gaming" strategies. e.g., pick your old state and new state. List some basic info (income - including sources, expenditures by class, etc.). Then, the site would suggest strategies for specific situations to ameliorate higher taxes or living costs. I think such a site could be built using input from "local" residents. e.g., I could give you "gaming" tips on how I lowered my total electric bill while moving from a state which had average electric rates to a state with the highest national rate. It CAN be done. But, of course, YMMV.

[Elissa Shadley]

Considering the population aging is getting more and more seriously, our government really needs to take some prompt measures to cope with such a situation. In my opinion, just listing the ten states is not enough. We should advocate all the people in our society to work together for the retirees’ benefits.
More effective measures are badly needed. Do you have some good ideas?
Hope you can join us and make for an Eden for the retirees.

[samclem]

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Originally Posted by Elissa Shadley Considering the population aging is getting more and more seriously, our government really needs to take some prompt measures to cope with such a situation. In my opinion, just listing the ten states is not enough. We should advocate all the people in our society to work together for the retirees’ benefits. More effective measures are badly needed. Do you have some good ideas? Hope you can join us and make for an Eden for the retirees.

Given that there's only so much "public money," and any "help" given to one disadvantaged group reduces spending elsewhere, retirees are the group least deserving of special good deals.
A retiree is someone who has stopped working, usually due to age. There's hardly anything more predictable than getting old. Most of us have had decades to get ready for retirement. Others, victims of disease or accident, or little kids who happen to live in a home with parents who may not care, are far more worthy of public protection and assistance. If a retiree is poor and cannot work, he/she may deserve assistance based on that poverty, but I can't make the case for giving them any special benefits because they are old and have stopped working.
Folks need to make their own Eden, we don't owe them one at the expense of others.

[Aiming_4_55]

Good article, thanks.

I'm in MN, 2nd worst according to the article and not yet retired so it has limited impact to me now.

My impression is the article highlighted several key items like tax on SS and pension, etc. etc. to determined the rankings, but it wasn't comprehensive enough for me to say it's that bad.

When I relocated from Chicago to St Paul, I feared that the State Income taxes were doubled among other hits that would hurt me. After living here 6+ years, it wasn't so bad as a variety of other costs, i.e. property taxes, insurance, gas, housing, etc are much lower for us.

Anyone considering a relocation really needs to perform a detailed review based on their lifestyle/family, needs, and income streams. I've looked at Florida for pre-retirement and post-retirement, for us, it's not really a clear cut win to move. YMMV

[HFWR]

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Originally Posted by Koolau What would be nice would be a site which would help us with specific "gaming" strategies. e.g., pick your old state and new state. List some basic info (income - including sources, expenditures by class, etc.). Then, the site would suggest strategies for specific situations to ameliorate higher taxes or living costs. I think such a site could be built using input from "local" residents. e.g., I could give you "gaming" tips on how I lowered my total electric bill while moving from a state which had average electric rates to a state with the highest national rate. It CAN be done. But, of course, YMMV.

Sounds like an opportunity to develop a website, have it go "viral", have an IPO, then retire a dotbomb dotcom gazillionaire. Then, no worries about where to live...

Texas has no income tax, so good there, but property taxes and sales taxes are pretty high. Haven't calculated the resulting tax "load", but not actively contemplating moving, either...

[Rustic23]

Texas sales tax is about 1% higher than other states with a sales tax. Yes, property taxes are higher, yet, home value in many areas of the state or considerably cheaper. In fact, when I compared living in CA with Texas for similar homes, the property taxes would be about the same as the price of a lake house in CA was through the roof! That's why just comparing rates does not work.

[ziggy29]

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Originally Posted by Rustic23 Texas sales tax is about 1% higher than other states with a sales tax. Yes, property taxes are higher, yet, home value in many areas of the state or considerably cheaper. In fact, when I compared living in CA with Texas for similar homes, the property taxes would be about the same as the price of a lake house in CA was through the roof! That's why just comparing rates does not work.

And even this needs to be considered on a case by case basis. If one is "house rich" and "income poor," Texas can be a tax hell because they have a fairly high property tax rate, a high sales tax rate, and barely benefit from the lack of state income tax. On the other hand, if they own a modest home, don't buy a lot of discretionary taxable "stuff" and have a solid income, it's one of the better places from a tax stadpoint. (But in our case, you may spend all the savings on cooling the house in the summer and in paying to have water trucked in for your water utility because the usual source of your city's water has run dry.)

[SunsetSail]

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Originally Posted by Rustic23 Texas sales tax is about 1% higher than other states with a sales tax. Yes, property taxes are higher, yet, home value in many areas of the state or considerably cheaper. In fact, when I compared living in CA with Texas for similar homes, the property taxes would be about the same as the price of a lake house in CA was through the roof! That's why just comparing rates does not work.

The Texas sales tax rate is average for high population states, but I agree with your point overall. Especially because the Texas sales tax base is larger than most other states due to the level of services that are subject to sales tax in Texas. Rate to rate comparisons are not apples to apples.

Although heavy Amazon ordering and accidentally forgetting to self-assess use tax on purchases may relieve some of this burden.

[Rustic23]

Also you have to look at what the sales tax applies to. In Texas, Groceries, prescription and non prescription drug are not taxable. There are also a couple of 'sales tax holidays' prior to back to school on clothing, school supplies and such. Also you have to consider the state tax vs a stat+municipality tax. Many areas in Texas do not have the municipality tax. Also property taxes vary. In my area we have a Municipal Water District, with a high tax, low property values, no municipality tax, no income tax, property tax frozen for over 65 (both county and school). Bottom line, however, while I believe the cost of government is significantly lower than say CA. or NY. it is most likely not far off of most states. And, DW ain't moving so it is really a mute point.

[Koolau]

[QUOTE=HFWR;1084256]Sounds like an opportunity to develop a website, have it go "viral", have an IPO, then retire a dotbomb dotcom gazillionaire. Then, no worries about where to live...

As I fantasized about such a site I thought about your suggestion - for about 3 seconds. Sounded too much like W*RK to me! I hereby freely give my idea to anyone who wishes to develop such a site. Have at it!

[HFWR]

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Originally Posted by Rustic23 Also you have to look at what the sales tax applies to. In Texas, Groceries, prescription and non prescription drug are not taxable. There are also a couple of 'sales tax holidays' prior to back to school on clothing, school supplies and such. Also you have to consider the state tax vs a stat+municipality tax. Many areas in Texas do not have the municipality tax. Also property taxes vary. In my area we have a Municipal Water District, with a high tax, low property values, no municipality tax, no income tax, property tax frozen for over 65 (both county and school). Bottom line, however, while I believe the cost of government is significantly lower than say CA. or NY. it is most likely not far off of most states. And, DW ain't moving so it is really a mute point.

It's 8.25% here in DFW, to fund mass transit, but that's not out-of-line with other cities.

http://www.bankrate.com/finance/taxe...e-country.aspx

[eytonxav]

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Originally Posted by HFWR It's 8.25% here in DFW, to fund mass transit, but that's not out-of-line with other cities. Cities with highest sales tax rates

I'm not sure there is much relationship between the 8.25% sales tax and funding mass transit. Look at how long its taken to deploy light rail, and now we will have toll roads everywhere (some even with foreign owners). Isn't most of that sales tax going to education and other state services?

[HFWR]

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Originally Posted by DFW_M5 I'm not sure there is much relationship between the 8.25% sales tax and funding mass transit. Look at how long its taken to deploy light rail, and now we will have toll roads everywhere (some even with foreign owners). Isn't most of that sales tax going to education and other state services?

The DART portion is 1.0%.