Once you retire, you will no longer depend upon a particular location for your economic survival. That’s the primary motivation behind many retirees’ plans to move to a more affordable locale. Plus, you might simply enjoy the weather, scenery, or lifestyle offered by another city or state.
But in addition to those important considerations, it might surprise you to learn that some states are more “retiree friendly” than others. There are many factors to consider, such as the cost of housing or healthcare, but you might also be interested to learn that some states will tax your Social Security benefits.
On a federal level, many retirees pay taxes on their Social Security income, depending upon their overall taxable income. As a federal retiree you will enjoy an annuity, TSP withdrawals, and of course your Social Security benefits.
If your total taxable income falls between $25,000 and $34,000 (for singles) or between $32,000 and $44,000 (for couples), up to 50 percent of your Social Security checks can be taxed. If you earn above those amounts, up to 85 percent of benefits can be subject to federal income taxes.
Those figures represent potential tax brackets at the federal level, but many states also impose an income tax. Luckily, they don’t all tax Social Security benefits, but currently these states still do:
- New Mexico
- North Dakota
- Rhode Island
- West Virginia (but they’re phasing out this tax by 2022)
State income taxes alone might not be your primary concern when evaluating future retirement locations. But because this issue can impact your overall income, it’s certainly one issue worth investigating.
If you’re considering a move after retirement, let us help you weigh the pros and cons. Together we can estimate your budget and living expenses, and make a decision that is both affordable and satisfying.