When planning for retirement, it is important to consider the tax implications of your chosen location. Retirement income is subject to federal income tax, but the way states tax retirement income varies widely. While some states do not levy any income tax on retirement income, others tax all forms of retirement income, including Social Security benefits, pensions, and IRA and 401(k) distributions. Working with a financial advisor can help you avoid unnecessary taxes and make the most of your retirement income.
If you are looking for a tax-friendly state for retirement, there are 11 states that do not tax retirement income at all: Alaska, Florida, Illinois, Mississippi, Nevada, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming. Some states that do not appear on this list, such as Georgia and Pennsylvania, still offer relatively generous tax exemptions for retirement income.
It is important to keep in mind that state tax laws can change over time, and details such as income caps for exemptions vary by state. Before relocating to save on taxes, it is important to check with the state tax office for details.
In addition to tax considerations, it is important to take into account other factors such as cost of living, access to healthcare, and quality of life when planning for retirement. A financial advisor can help you balance all these considerations and create a comprehensive retirement plan. SmartAsset’s free tool matches you with up to three financial advisors who serve your area.