With that in mind, let’s look at five states that are, financially speaking, the least retiree-friendly.
Alaska can be an expensive place to live. In terms of adjusted cost of living, WalletHub ranked Alaska the fourth-most expensive state to live in. Alaska was also recognized for having the second-highest annual cost for in-home services — e.g., caregiving, nutrition therapy, and rehabilitation — which can be attributed to the remote locations where residents live. On the flip side, Alaska is a tax-friendly state. There are no state income taxes, and according to the Tax Foundation, Alaska has an average state sales tax of 1.76%. (The average combines state and local sales taxes.)
Hawaii is an absurdly expensive state to live in. This remote set of islands is a popular vacation destination for practically the entire world, and for that reason, everything you pay for comes at a premium. To give you a little perspective, it costs 36% more to live in Hawaii than it does in Mississippi, and some costs even exceed those you’ll find in New York City. Compared with the Big Apple, the capital city of Honolulu has a cost-of-living index of 99.63, excluding rents, while groceries index at 112.49. That means groceries in Honolulu are 12% more expensive than they are in New York City. In fact, New York state as a whole is the only state in the nation that’s more expensive than Hawaii, according to the Council for Community and Economic Research.
Hawaii has no sales tax, but it does impose a general excise tax of 4% on all business activity. Meanwhile, there are 12 separate income tax brackets in Hawaii, with rates that range from 1.4% to 11%.
Maryland’s cost of living is relatively high compared with the rest of the country. The $650,000 average price of a home is more than twice the national average. Maryland also imposes both an estate tax and an inheritance tax; the only other state that does so is New Jersey. And as of 2012, Maryland’s combined state and local taxes averaged 10.9%, according to the Tax Foundation — the seventh-highest in the nation at the time.
New York has a quality of life that’s one of the best in the country, but it comes at a price. Tax-conscious retirees will be happy to know that there are no taxes on public pensions and Social Security benefits, but among all of the states on our list, New York also has the highest property taxes, with an average rate of 1.58%. Depending on the district, retirees 65 and older may receive a break on their property taxes, but real estate is expensive. When it comes to annual taxes on a home priced at the state median value, New York is ranked the third-highest in the nation.
|State||Effective Real-Estate Tax Rate||Annual Taxes on $176,000 Home||State Median Home Value||Annual Taxes on Home Priced at State Median Value|
Oregon can be an appealing destination for those who enjoy hiking and wine tastings, but you’ll pay for the privilege, as the cost of living in Oregon appears to be on the rise. According to a CNBC survey, in terms of cost of living, Oregon was ranked the 14th-most expensive state in 2014 — and it jumped to No. 7 in 2015. With a cost-of-living index at 128.5, Oregon is nearly 30% more expensive to live in than the U.S. average.
With no sales tax, the state collects most of its revenue from personal income taxes, and those rates are among the highest in the country. Single tax filers with income over $125,000 are taxed at 9.9%. On top of that, the property tax rate is 1.08%. As of 2016, Oregonians will pay $2,518 in taxes on an average home priced at $234,100. Also keep in mind that in Oregon, there’s no such thing as a homeowner’s exemption.
People have their own reasons for choosing a particular region to retire in. However as a financial planner, it’s my duty to provide you insight into these matters from a financial perspective. If you do find a state that appears to compliment your intended lifestyle, be sure that the city you choose also holds those characteristics.
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