As you near retirement age, you have a lot of decisions to make, like retiring to another state. First and foremost is determining what kind of lifestyle you want. Do you want to maintain your current lifestyle, live beneath your means, or have plenty to spare? Another factor is where you want to live.
Many retirees are moving south, according to United Van Lines. All of the top 10 outbound states are up north, while the top three inbound states are all in the south. Moving from one state to another seems like a great idea, but there are some financial and tax considerations when you retire to another state.
The business advisors at The Whitlock Co. explain some things to think about when retiring to another state.
Cost of Living
Cost of living is one consideration for retirement because you’re on a fixed income. Florida, one of the most popular choices for retirees due to the warm weather, is in the middle regarding the overall cost of living. Groceries and utilities might cost more than average there. One thing to note is that home insurance costs are higher in Florida due to the threat of hurricanes.
As you age, healthcare becomes more and more important to you. The average annual healthcare cost for someone ages 5 to 17 is $2000, while someone 65 and older typically spends $11,000 yearly. Make sure you take advantage of Medicare, and your healthcare providers accept Medicare as insurance. If you want to expand your healthcare options, make sure you explore health insurance that covers all of the gaps.
Estate & Inheritance Taxes
The federal government’s estate taxes apply to estates worth more than 12.92 million as of 2023. States may have lower thresholds. Most states that levy an estate or inheritance tax are up north, such as New York, Pennsylvania, and Illinois. If you’re concerned about these taxes, think about these when thinking about retiring to another state.
The IRS levies income taxes on Social Security benefits if your combined income exceeds $25,000 in one year. Some states may also impose personal income taxes. Florida and Texas are two prominent southern states that have no personal income taxes. Keep this in mind when deciding what state you want to retire to.
Plan Well When Retiring to Another State
The key to retiring to another state is to plan well. This means examining your current finances, how much money you plan on saving, and how big you want your nest egg to grow.