Worst States to Retire

[teej1985]

That's why it's so important to have the raw data on the various aspects that make for a "good" or a "bad" state. If you're retired, no kids, reasonably big stash, paid off home, etc., you're in a much better "state" than if you are still w*rking, have a house full of kids - needing private school to get even a half decent education, paying a mortgage, on and on and on, etc.

The difference between these two scenarios in Hawaii, for instance is almost literally night and day. Other states probably don't have as sharp a dividing line between my two suggested life-styles here.

Letting anyone else "boil down" the good, the bad and the ugly to come up with a state rating seems a waste of time. Maybe it's a place to start, but I'd want to dig into the specific details myself before deciding "best" vs "worst." Clearly, YMMV.

What are the Hawaii differences?

 

[USGrant1962]

I have a feeling that Maryland gets hit hard because of its inheritance tax, high crime, tax on retirement income, and high housing costs. But I think the only way inheritance tax gets you is if you're not a direct-line descendant (parent/child/grandchild etc).
...

You forgot the estate tax of 16% of everything over $5M, not indexed for inflation but there is portability for spouses. Yes, Maryland has both estate and inheritance taxes.

And retirement income is taxed at a high effective rate after a tiny personal exemption and 3 low brackets that end at $3K. The tax rate is from ~7.75-8.75% including the local tax of approx. 3% (other local taxes like Real Estate are not lower than average states due to this 3%).

For early retirees it behaves like an almost 8% flat tax on all income over around $6K ($9K for MFJ).

For older retirees, MD doesn't tax SS and has a nominal pension exclusion. Though, IRAs are excluded from the exclusion - so don't roll over your 401(k)! But, most states exclude SS so that doesn't help with relative rankings.

I've lived here for almost 20 years and Maryland is a nice state, but it is definitely in the bottom cohort for retiree (and worker) taxes.

 

[Sojourner]

IMHO, their "weather" ranking seems entirely based on how much cold and snow the state gets. How can Florida be ranked #3 for weather? The heat and humidity are stifling, not to mention the many hurricanes and tropical storms every year. I have been to various parts of Florida and California many, many times over my life, and it's not even close: California weather is much more to my liking than is Florida's.

 

[Fermion]

I am starting to think some place like where Skyking is building is best. Very moderate temperatures in summer and winter. I love eastern Washington in the fall, winter, spring and it gets a lot more sunshine, but it is hell in the summer here with the temperatures and insects. We just tried to go for a morning walk and were swarmed by these very annoying small flying things...bigger than gnats in Georgia, but not biting. Why do they have to try to get in your ears mouth and eyes. (I grew up in Georgia, I don't know how I survived the heat and gnats).

There really are few places to escape in the summer.

 

[euro]

I am starting to think some place like where Skyking is building is best. Very moderate temperatures in summer and winter. I love eastern Washington in the fall, winter, spring and it gets a lot more sunshine, but it is hell in the summer here with the temperatures and insects. We just tried to go for a morning walk and were swarmed by these very annoying small flying things...bigger than gnats in Georgia, but not biting. Why do they have to try to get in your ears mouth and eyes. (I grew up in Georgia, I don't know how I survived the heat and gnats).

There really are few places to escape in the summer.

Oh, you are in Eastern WA - your profile says "Seattle", so I was wondering - I lived in Seattle for 7 years and remember only maybe one or two days/nights with oppressive heat. Had no AC or even ceiling fans back then.... well, that was in the 80-ies, so maybe that has changed

 

[Koolau]

What are the Hawaii differences?

A retired person in Hawaii pays no state income tax on SS or pension. They pay state tax only on a portion of the proceeds of a 401(k). A retiree can wait for RMDs to pay any tax on 401(k) money. Since taxes are progressive, the total amount a retired person pays on the taxable income is quite small. RE taxes are cut dramatically as one ages past 65.

A w*rking person in Hawaii is taxed on most of his/her income and the rates go as high as 10+%. Since living in the state requires a relatively large income, most such people find themselves approaching the high end of the tax bite on at least some of their income. A SFH is probably needed for a family while a retired couple can easily manage in a condo (half the price = half the RE taxes.) The GET tax (essentially a sales tax) applies to almost everything (but pharma.) So a w*rking family spends just about everything they make and pays a lot of GET tax. A retired couple has the option to spend less (only 2 people instead of other family members.)

We have had years when the only state tax we paid was the GET tax and less than $2K on our relatively low RE taxes. A similar w*rking person might pay $8K to $10K total (plus GET.)

Big differences but YMMV.

 

[Fermion]

Oh, you are in Eastern WA - your profile says "Seattle", so I was wondering - I lived in Seattle for 7 years and remember only maybe one or two days/nights with oppressive heat. Had no AC or even ceiling fans back then.... well, that was in the 80-ies, so maybe that has changed

Yeah we used to live near Seattle but moved to the eastern side because we enjoyed the shoulder seasons and the winter more. When Seattle is 41 degrees and rain, it is typically 28 degrees here and either snowing or sunny.

Summer is pretty bad though...Seattle wins that one.

 

[F4mandolin]

Yeah we used to live near Seattle but moved to the eastern side because we enjoyed the shoulder seasons and the winter more. When Seattle is 41 degrees and rain, it is typically 28 degrees here and either snowing or sunny.

Summer is pretty bad though...Seattle wins that one.

I always thought summers were pretty nice. Yeah, can get a bit hot...but it is a dry heat which unless it gets well into the 90's doesn't bother me. But if you like 4 distinct seasons.....lovely weather. Fall was always my fav. These days....just seem to be too many fires every summer.

 

[Markola]

I'm wondering why Minnesota is number 10 on the list? Yeah, the weather sucks, but it's listed as only 10% of the criteria used for their determination. Affordability? Yes, Minnesota has high taxes. But the cost of most other things is near the USA average.

What is well-being? Article says, "Includes factors such as the number of adults over 62 per 100,000 residents and access to food and health care." Minnesota has excellent health care and we're in the farming belt, we're number one in turkey production, and Hormel foods world headquarters is here, so we've got access to food. (Who doesn't have access to food?)

Quality and cost of healthcare? Minnesota's consistently one of the top three states in this area.

So I don't understand why Minnesota is ranked number 10 in worst states to retire in.

And I'm looking to move out of the state.

Yeah, I immediately rejected the rankings based on Minnesota at tenth worst. There are just so many other benefits baked in, which weren’t considered. Typically #1 in education helps everything. Among the very top in income/capita. Often the most fully-employed state. Fly direct to about anywhere. As you say, world class health care. Mayo Clinic, anyone? Crime is low. Winter is escapable.

We like visiting California and Georgia in winter, but are happy to keep our MN citizenships for different reasons.

 

[Northforker]

Hawaii isn't in the top 10?, Texas is? I question these rankings?

 

[Koolau]

Hawaii isn't in the top 10?, Texas is? I question these rankings?

Again, it so depends on how you emphasize the various categories they have selected to look at.

For instance, if you simply took out cost of living (IOW if you could say "money is no object") the rankings would be dramatically different. Well, in our case (to a first approximation) money IS no object since we have "enough" to live comfortably in Hawaii. Therefore WE rate it as Number one. I'm sure lots of Texas folks feel the same way about their state! So do lots of other people feel that way about the state they have chosen as their FIRE state of residence.

Again, these "best places" kinds of stories are entertaining, I suppose, but don't have a lot of substance without specific facts. I've mentioned before that the old "Places Rated Almanac" had actual data and (though they also made their numerical picks) the data allowed one to pick and choose which aspects to use in making their own ratings. (For instance, I totally ignored empl*yment opportunities - go figure.)

Unfortunately, nearly as I can tell, the Almanac has not been updated lately. Here's what I found on Amazon. https://www.amazon.com/Places-Rated-Almanac-Classic-Finding/dp/0979319900

IIRC my copy dates to 1998 or some such. I recall thinking PRA had a "weird" way of determining the best weather (which put Hawaii at a disadvantage.) I think they picked the "ideal" temperature as 65 degrees F and began subtracting points for every degree above (for the average high) or below (for the average low.) So Hawaii was great for the lows but got significantly dinged for the highs. BUT I'm "cold" unless the temp gets to at least 80! So when I did MY calculations, Hawaii came out a clear #1 for "weather." I think it was maybe 3 or 4 according to PRA.

So, give me the data, and I will decide for myself.

 

[Diogenes]

A retired person in Hawaii pays no state income tax on SS or pension. They pay state tax only on a portion of the proceeds of a 401(k). A retiree can wait for RMDs to pay any tax on 401(k) money. Since taxes are progressive, the total amount a retired person pays on the taxable income is quite small. RE taxes are cut dramatically as one ages past 65.

A w*rking person in Hawaii is taxed on most of his/her income and the rates go as high as 10+%. ...

Big differences but YMMV.

Good point... but the difference is less about retired vs. still working, than age, and source of income. A person might be retired, renting a room in somebody's condo, cooking at home instead of going-out... and wielding a large taxable portfolio, that incurs dividend income annually. The state is going to rapaciously attack those dividends, treating them as regular income (unlike the Feds). This isn't a statement about withdrawing from the portfolio... it's just an inherent property of what the portfolio is.

I'm new here, and not yet fully conversant with the demographics of the Forum... but judging from the name of the Site, I would expect lots of people still in middle-age, with sizeable taxable investments. They have to be taxable, because barring a clever trick like Peter Thiel's putting his start-up windfall into a Roth-IRA, there just isn't enough time - not enough years - to accumulate a large IRA/401K. Most of the money is/was saved outside of tax-favored vehicles. Surgeons making $700K/year (this is not me!) who live frugally, put everything into the S&P 500, and retire at 50... they're putting 10X as much annually into their taxable portfolio, as their Roth. It adds up!

If instead we google-search "best state for wealthy people to retire", we get pablum about where to park your yacht. Not helpful for the frugal sort!

 

[ncbill]

A retired person in Hawaii pays no state income tax on SS or pension.

isn't that only for public pensions?

 

[brett]

I believe the worst state or the worst country to retire in is one where you are not happy. For whatever reason.

The converse is also true.

 

[Chuckanut]

I believe the worst state or the worst country to retire in is one where you are not happy. For whatever reason.

The converse is also true.

I was having this conversation just yesterday at our local coffee house. A friend and I were grousing big-time about the high cost of living in our area.

A young man at the table next to us was busy working on his computer. He apparently saw somebody outside the shop he wanted to talk with and took off leaving the computer on the table with his phone and assorted work papers. 5 minutes later he returned and resumed work.

I realized it's nice to live in an area where you can leave $1000 of electronics on table in a coffee shop, disappear out of sight for 5 minutes and be reasonably sure it would all be there when you returned. Not that I would make a habit of doing that.

 

[Ronstar]

I believe the worst state or the worst country to retire in is one where you are not happy. For whatever reason.

The converse is also true.

Living in Illinois, I am most unhappy when I pay my real estate taxes. Other than that, I'm generally not unhappy. I could be happier elsewhere, but finding that place would take a lot of research and work only to get vetoed by DW. So I'll stay here until DW tells me we need to move and to where.

 

[brett]

We have lived in a fair number of places and we have traveled extensively.

There are aways trade-offs on each of the ranked list of priorities.

 

[CaptTom]

I realized it's nice to live in an area where you can leave $1000 of electronics on table in a coffee shop, disappear out of sight for 5 minutes and be reasonably sure it would all be there when you returned

^^^ This!

I don't know if there's a way to quantify it, but being able to trust the average person to do the right thing has value. Where I grew up, if you parked your car anywhere but a big parking lot, you left the keys in the ignition, in case someone had to move it while you were gone. Unfortunately that town is now full of people from the crime-ridden cities to the South, and it's not like that anymore. Of course, they've driven up the housing prices to the point where nobody local can afford to live there anyway.

 

[W2R]

All I know is that we are blissfully happy living here in Louisiana. People in our region are so sweet and down to earth. Our food, art, music, and history are absolutely breathtaking, and our money stretches farther than in some retirement locations. Louisiana is far from perfect and there are many youtube videos which will tell you all about that. But we have adjusted to the imperfections, revel in the beauty of this place, and for us, it is just right. We have no intention of leaving Louisiana, ever. When you find a place and it "clicks" and makes you happy, might as well build a happy home there until you find a doggone good reason to leave.

Bear in mind that our high was 103F today and I can still say this even after ~30 years in our beloved state!

 

[Alex The Great]

They pay state tax only on a portion of the proceeds of a 401(k). A retiree can wait for RMDs to pay any tax on 401(k) money. Since taxes are progressive, the total amount a retired person pays on the taxable income is quite small.

If I understand it correctly, this exemption is about employer sponsored 401K only. That's said if you moved everything into traditional/rollover IRA (most people does) then you are out of luck.

 

[Koolau]

isn't that only for public pensions?

Nope. Virtually all pensions. I use a CPA for my taxes to insure I'm playing by the rules and my Corp. pension is not taxed.

 

[Koolau]

If I understand it correctly, this exemption is about employer sponsored 401K only. That's said if you moved everything into traditional/rollover IRA (most people does) then you are out of luck.

I think that is right. I don't have that problem as I converted all my tIRAs to Roths at very low state tax rates (I "titrated" the state tax rate.) The progressive rates mean low taxes on "reasonable" taxable income - and I was able to decide how much taxable income I was going to have in any given year. YMMV

 

[Koolau]

Good point... but the difference is less about retired vs. still working, than age, and source of income. A person might be retired, renting a room in somebody's condo, cooking at home instead of going-out... and wielding a large taxable portfolio, that incurs dividend income annually. The state is going to rapaciously attack those dividends, treating them as regular income (unlike the Feds). This isn't a statement about withdrawing from the portfolio... it's just an inherent property of what the portfolio is.

I'm new here, and not yet fully conversant with the demographics of the Forum... but judging from the name of the Site, I would expect lots of people still in middle-age, with sizeable taxable investments. They have to be taxable, because barring a clever trick like Peter Thiel's putting his start-up windfall into a Roth-IRA, there just isn't enough time - not enough years - to accumulate a large IRA/401K. Most of the money is/was saved outside of tax-favored vehicles. Surgeons making $700K/year (this is not me!) who live frugally, put everything into the S&P 500, and retire at 50... they're putting 10X as much annually into their taxable portfolio, as their Roth. It adds up!

If instead we google-search "best state for wealthy people to retire", we get pablum about where to park your yacht. Not helpful for the frugal sort!

Yeah, if you have $75K to $100K of taxable income due to high dividends thrown off by your portfolio, you will get hit pretty hard. I'll admit that I was more lucky than good about my tax planning (mostly before moving to Hawaii.) Most of my money was in either tIRAs or 401(k). Once moved, I could take what I wanted from the 401(k) to keep the RATE low and/or convert tIRA to Roth (a little at a time) to keep the RATE low. My dividends are in the low thousands from my relatively small taxable amount. So my state tax RATE is very low.

I must say that having tons of taxable income thrown off by taxable funds (individual equities or MFs) is not a bad problem to have. Keep in mind that you can control your FED taxes by taking from your taxable funds and pay no FED taxes or Hawaii state taxes on THOSE proceeds.

 

[Chuckanut]

Washington is fairly high on sales tax, which I guess could cost you quite a bit more than income tax would in retirement. Say you were pulling some money from a Roth. It would be better to live in a state with a low sales tax like 4% and have some state income tax (like 6%) than live in a state like Washington which can have a 10% sales tax. It can be a lot of money on big ticket purchases.

I remember the days when nobody gave a rip what happened in Washington state. When I traveled I would have to add “The state not D.C.” when I told people where I was from.

I liked it better here when people thought of us as bunch of lumberjacks at the end of the line in a remote corner of the lower 48.

 

[Badger]

None of those were places of interest to me as a retirement location but then neither were about 39 others. I have been a Florida resident for the past 60 years and in my present location in NE Fl since '73 and have no interest in moving anywhere else. I should also say I would not move anywhere else in the state.