Did you know that 37 states currently do not tax Social Security benefits? Now that you know, it behooves all of us to relocate for retirement to states with fantastic weather, great food, and amazing scenery!
Taxes and ever-rising healthcare costs are the largest expenses for retirees. We might as well put some effort into controlling what we can control. If we’ve already paid a large amount of FICA tax during our working years, doesn’t it seem like robbery that we’re getting taxed again once we get to collect? I, for one, refuse to let the government take more advantage of me in retirement.
States That Don’t Tax Social Security
Readers know I have a bias for West Coast living, after spending over 10 years living on both coasts. So if Social Security is your main source of income, or if you have a great deal of income allowing you a lot of flexibility, why retire in Utah, Colorado, New Mexico, Nebraska, Kansas, Missouri, Montana, North Dakota, Minnesota, West Virginia, Vermont, Connecticut, or Rhode Island? I really want to hear from those of you who have plans to retire in these states.
A lot of people will cite family and friends as a reason why they’ll never leave. But come on, it’s so easy to get on a bus and bring the whole entourage with you. Besides, the internet has made keeping in touch so much easier. Just fire up Skype or a Google video chat and you can see your loved ones for free in a matter of seconds.
Not only are many of the states that tax Social Security cold as hell during the winter, they are also hot as hell during the summer. Looking at the map above, it’s clear the best states to retire in are California, Hawaii, and Florida. Oregon is not bad either given they don’t have any sales tax.
Here is the entire list of states that don’t tax Social Security benefits: Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Washington D.C., Wisconsin, or Wyoming.
Although one study shows that the wealthiest people reside in the East and South, I dare say the happiest people reside on the West Coast and Florida. Tack on the benefit of paying no Social Security tax, we’ll all be Social Security millionaires when we retire!
Save On Social Security Taxes
The amazing thing about Social Security is that most of the people who are under 40 that I talk to don’t expect Social Security to be there when they retire. Frequently cited reasons are they’ll either be dead before they can collect, or the government will simply reduce benefits down to nothing.
If you can reduce your expenses to a negligible amount during retirement, you could conceivably completely live off Social Security. Without debt, all you’re really paying for is food, entertainment, health insurance, Federal taxes, sales taxes, and property taxes if you own. If you have a low income, you’ll also qualify for Medicare or Medicaid.
Now imagine if you actually saved some money in a 401k or consistently contributed to an after-tax, low-fee digital wealth management account that produced compounded returns over several decades. You could live a pretty comfortable life while relaxing on the beach in one of America’s loveliest states!
Related: The Best States For Retirement
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