Pre-retirees need to consider a lot more than snow days and tradition, according to a recent Bankrate report and Investor Ideas article.
Where you live now
“During their careers, the ‘acquiring wealth years,’ many people live in places that have lots of jobs – and the higher cost of living that goes along with that,” the article says.
“In retirement, many of them want to move to a state where they can enjoy the same or an even better lifestyle with less money.”
States have different tax laws and other regulations that can significantly affect your retirement funds. Be aware of these as you plan for where you want to live and how you want to live.
Take note my fellow Virginians: Our state is listed as number five and is the only coastal state included in the top rankings of Best Places to Retire 2016 by Bankrate.
4 tips to consider
If you’re planning to settle in one of the other top five “best states to retire”—Wyoming, South Dakota, Colorado or Utah (in descending order)—or elsewhere, here are some tips to consider:
- Take a look at the tax laws in the state where you want to retire. Two of the top five spots on Bankrate’s Best List—South Dakota and Wyoming—don’t have a state income tax and neither do several others: Nevada, Texas, Washington, Florida, and Alaska.
- An itemized deduction in one state may not be an itemized deduction in another. If you use the long form (1040) to file federal income taxes, hire a good CPA for guidance.
- Analyze how your new state taxes retirement income. States differ on taxing interest income from tax-free municipal bonds, and some states give tax credits, treat public and private pensions differently, or offer federal, military or blanket exclusions.
- These states are community property states: Idaho, New Mexico, Texas, California, Arizona, Wisconsin, Nevada, Louisiana, and Washington. These states divide all martially-acquired assets and debt 50/50 in the event of divorce. (Except for inheritance or gifts received by one spouse and maintained separately in his or her name.) Talk to an estate planning attorney about how this may impact you, if you are moving from a “separate property” state.
New state’s estate planning expert
In fact, all of your existing estate planning documents should be reviewed by an experienced estate planning attorney in your new state because of the potential for new and different laws and requirements.
Reference: Bankrate, “Best Places to Retire 2016,” Investor Ideas “3 Tips for Retiring Out of State”