Advice iq retirees, tax friendly states

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  • 1. Retirees: Tax-Friendly StatesSubmitted by Larry Frank Sr. on Thu, 04/04/2013 - 3:00pmWhat states tax retirees the least? That’s something to ponder as youplan where to retire to. It’s not the predominant factor, but an importantconsideration.Kiplinger’s put together an interactive map that shows tax friendliness forretirees. The magazine has links to states with no sales tax, or low salestaxes, no income tax and more.Five of its top 10 are in the South, a band stretching from the Atlantic tothe Gulf Coast: South Carolina, Georgia, Alabama, Mississippi andLouisiana. Then there is Alaska and two in the West, Nevada andWyoming. Perhaps surprisingly, two states in the Northeast are in thatroster, Delaware and Pennsylvania.In Alabama, for instance, Social Security is not included in state incometax. Seniors do not pay state property taxes and may be exempt fromlocal property levies. Plus, Alabama has no state inheritance or estate tax.Pennsylvania is also generous to retirees, with Social Security and alltypes of pensions excluded from state taxation. Plus, the state does nottax distributions from 401(k)s and individual retirement accounts.Neighboring New York is on the list of the 10 least tax-friendly. Accordingto the Tax Foundation, cited in the magazine, New Yorkers pay 12% oftheir income in state and local taxes. It has some of the highest propertytaxes in the nation. On the positive side, it does not tax Social Securityand authorizes localities to grant property tax breaks to seniors.Montana, right next door to tax-friendly Wyoming, also is on the 10 worstlist. While it does not have a general sales tax, it nicks most forms ofretirement income, including Social Security. It does permit exemptions ofup to $3.760 per person on pensions and annuities.The magazine notes that four states have no sales tax, in addition to
  • 2. Montana: Delaware, Vermont, Alaska and Oregon.However, I post this with reservations because such an approach tomaking decisions has the tax tail wagging the decision dog. Moreimportant than taxes in choosing a retirement locale, I think, arethe weather, the prevalence of natural disasters (lots of hurricanes ortornados?), other family members’ locations, hobbies, work, among otherfactors.Governments need some source of revenue to fund themselves. If theydon’t tax one thing, it is likely they tax something else. Thus, you need tolook at how your affairs are currently structured, or would be if youmoved.See if you are leaving a place where taxes are structured one way (sayincome taxes on retirement income) only to find they are higherelsewhere. Maybe your new home state has no income tax, but propertytaxes are so punitive that they outweigh the lack of an income levy.Finally, in light of tax revenue shortfalls in many states and localities,taxes are likely to rise everywhere.Another handy website for tax comparisons is the Federation of TaxAdministrators. The Tax Foundation’scalculators and data tools sectionsmay also be helpful.Follow AdviceIQ on Twitter at @adviceiq.Larry R. Frank Sr., CFP, is a Registered Investment Adviser (California)in Roseville, Calif. He is the author of the book, Wealth Odyssey. He hasan MBA with a finance concentration and B.S. cum laude in physics withwhich he views the world of money dynamically. He has peer-reviewedresearch published in the Journal of FinancialPlanning. www.blog.BetterFinancialEducation.com.AdviceIQ delivers quality personal finance articles by both financialadvisors and AdviceIQ editors. It ranks advisors in your area byspecialty. For instance, the rankings this week measure the number ofclients whose income is between $250,000 and $500,000 with thatadvisor. AdviceIQ also vets ranked advisors so only those with pristineregulatory histories can participate. AdviceIQ was launched Jan. 9, 2012,by veteran Wall Street executives, editors and technologists. Right now,investors may see many advisor rankings, although in some areas only afew are ranked. Check back often as thousands of advisors areundergoing AdviceIQ screening. New advisors appear in rankings daily.Topic:TaxesInheritance TaxesReduction Strategies