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Avoid These 30 States in Retirement If You Want To Keep Your Money

Joel Anderson
·13 mins read
Avoid These 30 States in Retirement If You Want To Keep Your Money
Avoid These 30 States in Retirement If You Want To Keep Your Money

Many Americans spend the better part of their lives preparing for retirement. Even if it’s just routing a portion of every paycheck into a 401(k) or individual retirement account, you’re likely to spend almost all of your adulthood slowly building your nest egg so you can enjoy a comfortable retirement. However, with all of the focus on how fast you can put money into your savings, it’s possible that you’re overlooking the other side of the equation: how fast you’ll be taking that money back out.

That storied $1 million in retirement savings might finally be yours, but what if you live in an area where property taxes and Social Security income taxes force you to rely more heavily on your nest egg? Likewise, even if you started saving later in life, you can effectively boost the purchasing power of your limited funds by opting to live in a state with a cheap cost of living and lower taxes.

Where you live in your golden years can be an essential part of your retirement planning. Once you’re on a fixed income, you’ll need to maximize your dollars. GOBankingRates found the worst states for retirees to hang on to their savings by analyzing the expenses most relevant to those ages 65 and older: property taxes, cost of living, sales taxes, Social Security income taxes and more. Note that the metric used for cost of living is an index where 100 is the U.S. average, sourced from the Missouri Economic Research and Information Center.

The following is a list of the 30 states to avoid when you’re considering where to spend your retirement, with the No. 1 state being the most expensive for retirees. Even if your decision is influenced by your family’s location or personal preferences, it’s worth understanding how these different costs can add up so that you’re able to budget accordingly. If you’re flexible in terms of where you’re willing to live, you might even be able to save enough money to retire early and quit the daily grind.

Last updated: Sept. 14, 2020

30. Oregon

  • Average Social Security benefits: $1,540.08

  • State tax on Social Security benefits: No

  • Median home list price: $367,262

  • Median property tax rate: 0.87%

  • Estimated property tax: $3,195

  • Cost-of-living index: 137

  • Average annual healthcare spending: $7,809

  • State sales tax: 0%

29. Louisiana

  • Average Social Security benefits: $1,373.64

  • State tax on Social Security benefits: No

  • Median home list price: $167,121

  • Median property tax rate: 0.18%

  • Estimated property tax: $301

  • Cost-of-living index: 92.9

  • Average annual healthcare spending: $6,652

  • State sales tax: 9.52%

28. West Virginia

  • Average Social Security benefits: $1,462.86

  • State tax on Social Security benefits: West Virginia will begin phasing out taxes on Social Security income for most residents in 2021.

  • Median home list price: $107,601

  • Median property tax rate: 0.49%

  • Estimated property tax: $527

  • Cost-of-living index: 91.4

  • Average annual healthcare spending: $5,959

  • State sales tax: 6.41%

27. Wisconsin

  • Average Social Security benefits: $1,588.45

  • State tax on Social Security benefits: No

  • Median home list price: $204,452

  • Median property tax rate: 1.76%

  • Estimated property tax: $3,598

  • Cost-of-living index: 95.9

  • Average annual healthcare spending: $7,659

  • State sales tax: 5.46%

Related: More Than Half of Americans Have Changed Their Retirement Contributions Due to COVID-19: Should You?

26. Ohio

  • Average Social Security benefits: $1,469.82

  • State tax on Social Security benefits: No

  • Median home list price: $151,694

  • Median property tax rate: 1.36%

  • Estimated property tax: $2,063

  • Cost-of-living index: 92.8

  • Average annual healthcare spending: $6,625

  • State sales tax: 7.17%

25. South Dakota

  • Average Social Security benefits: $1,489.03

  • State tax on Social Security benefits: No

  • Median home list price: $206,930

  • Median property tax rate: 1.28%

  • Estimated property tax: $2,649

  • Cost-of-living index: 96.5

  • Average annual healthcare spending: $6,952

  • State sales tax: 6.40%

24. Florida

  • Average Social Security benefits: $1,470.06

  • State tax on Social Security benefits: No

  • Median home list price: $258,277

  • Median property tax rate: 0.97%

  • Estimated property tax: $2,505

  • Cost-of-living index: 98.4

  • Average annual healthcare spending: $6,727

  • State sales tax: 7.05%

23. Washington

  • Average Social Security benefits: $1,643.06

  • State tax on Social Security benefits: No

  • Median home list price: $418,279

  • Median property tax rate: 0.92%

  • Estimated property tax: $3,848

  • Cost-of-living index: 111

  • Average annual healthcare spending: $8,060

  • State sales tax: 9.21%

See: Want To Retire Early in Your State? Aim To Save This Much

22. Utah

  • Average Social Security benefits: $1,586.67

  • State tax on Social Security benefits: Yes

  • Median home list price: $356,486

  • Median property tax rate: 0.60%

  • Estimated property tax: $2,139

  • Cost-of-living index: 96.2

  • Average annual healthcare spending: $6,305

  • State sales tax: 7.18%

21. New Jersey

  • Average Social Security benefits: $1,707.85

  • State tax on Social Security benefits: No

  • Median home list price: $345,051

  • Median property tax rate: 1.89%

  • Estimated property tax: $6,521

  • Cost-of-living index: 124.4

  • Average annual healthcare spending: $6,924

  • State sales tax: 6.60%

20. New York

  • Average Social Security benefits: $1,573.88

  • State tax on Social Security benefits: No

  • Median home list price: $273,294

  • Median property tax rate: 1.23%

  • Estimated property tax: $3,362

  • Cost-of-living index: 135.0

  • Average annual healthcare spending: $6,918

  • State sales tax: 8.52%

19. Illinois

  • Average Social Security benefits: $1,549.00

  • State tax on Social Security benefits: No

  • Median home list price: $203,598

  • Median property tax rate: 1.73%

  • Estimated property tax: $3,522

  • Cost-of-living index: 95.3

  • Average annual healthcare spending: $6,795

  • State sales tax: 9.08%

18. Kansas

  • Average Social Security benefits: $1,594.70

  • State tax on Social Security benefits: Residents with a federal adjusted gross income of $75,000 or less receive Social Security benefits that are exempt from Kansas income tax.

  • Median home list price: $151,474

  • Median property tax rate: 1.29%

  • Estimated property tax: $1,954

  • Cost-of-living index: 87.4

  • Average annual healthcare spending: $6,707

  • State sales tax: 8.68%

17. Montana

  • Average Social Security benefits: $1,452.61

  • State tax on Social Security benefits: Yes, but the taxable amount in Montana may be different from the federally taxable amount.

  • Median home list price: $281,217

  • Median property tax rate: 0.83%

  • Estimated property tax: $2,334

  • Cost-of-living index: 107.8

  • Average annual healthcare spending: $6,469

  • State sales tax: 0%

Learn: How Long $1 Million in Retirement Will Last in Every State

16. Minnesota

  • Average Social Security benefits: $1,650.37

  • State tax on Social Security benefits: Social Security income is taxable in Minnesota, but married couples can subtract $4,500 of their federally taxable Social Security benefits from their state income, singles and heads of household can subtract $3,500, and married couples filing separately can subtract $2,250. If married filers make more than $78,530, the break gets phased out, and it’s gone for those with more than $101,030 of taxable income.

  • Median home list price: $260,965

  • Median property tax rate: 1.05%

  • Estimated property tax: $2,740

  • Cost-of-living index: 100.6

  • Average annual healthcare spending: $7,496

  • State sales tax: 7.46%

15. Massachusetts

  • Average Social Security benefits: $1,623.28

  • State tax on Social Security benefits: No

  • Median home list price: $430,904

  • Median property tax rate: 1.04%

  • Estimated property tax: $4,481

  • Cost-of-living index: 130.3

  • Average annual healthcare spending: $8,394

  • State sales tax: 6.25%

14. Nevada

  • Average Social Security benefits: $1,433.24

  • State tax on Social Security benefits: No

  • Median home list price: $314,512

  • Median property tax rate: 0.84%

  • Estimated property tax: $2,642

  • Cost-of-living index: 102.8

  • Average annual healthcare spending: $6,775

  • State sales tax: 8.32%

13. Maine

  • Average Social Security benefits: $1,446.08

  • State tax on Social Security benefits: No

  • Median home list price: $242,755

  • Median property tax rate: 1.09%

  • Estimated property tax: $2,646

  • Cost-of-living index: 117.3

  • Average annual healthcare spending: $7,761

  • State sales tax: 5.50%

12. Texas

  • Average Social Security benefits: $1,481.04

  • State tax on Social Security benefits: No

  • Median home list price: $208,656

  • Median property tax rate: 1.81%

  • Estimated property tax: $3,776

  • Cost-of-living index: 92.0

  • Average annual healthcare spending: $6,516

  • State sales tax: 8.19%

Don’t Miss: The 50 Cheapest Countries To Retire To

11. Alaska

  • Average Social Security benefits: $1,501.01

  • State tax on Social Security benefits: No

  • Median home list price: $316,282

  • Median property tax rate: 1.04%

  • Estimated property tax: $3,289

  • Cost-of-living index: 127.5

  • Average annual healthcare spending: $10,108

  • State sales tax: 1.76%

10. Colorado

  • Average Social Security benefits: $1,573.59

  • State tax on Social Security benefits: If you’re younger than age 65, up to $20,000 in benefits can be excluded. If you’re age 65 or older, up to $24,000 can be excluded.

  • Median home list price: $408,469

  • Median property tax rate: 0.60%

  • Estimated property tax: $2,451

  • Cost-of-living index: 103.5

  • Average annual healthcare spending: $6,911

  • State sales tax: 7.65%

9. New Mexico

  • Average Social Security benefits: $1,439.01

  • State tax on Social Security benefits: Yes

  • Median home list price: $205,831

  • Median property tax rate: 0.55%

  • Estimated property tax: $1,132

  • Cost-of-living index: 88.7

  • Average annual healthcare spending: $6,680

  • State sales tax: 7.82%

8. Missouri

  • Average Social Security benefits: $1,479.52

  • State tax on Social Security benefits: Social Security benefits are not taxed for single taxpayers with an AGI of less than $85,000 and for married couples with an AGI of less than $100,000. Taxpayers who exceed those income limits may qualify for a partial exemption on their benefits.

  • Median home list price: $163,731

  • Median property tax rate: 0.91%

  • Estimated property tax: $1,490

  • Cost-of-living index: 89.1

  • Average annual healthcare spending: $6,720

  • State sales tax: 8.18%

7. Connecticut

  • Average Social Security benefits: $1,723.82

  • State tax on Social Security benefits: They’re exempt for individual taxpayers with a federal AGI of less than $75,000 and for married taxpayers filing jointly with a federal AGI of less than $100,000. For people exceeding these thresholds, you can still deduct 75% of taxable Social Security benefits.

  • Median home list price: $270,986

  • Median property tax rate: 1.63%

  • Estimated property tax: $4,417

  • Cost-of-living index: 125.2

  • Average annual healthcare spending: $7,611

  • State sales tax: 6.35%

6. Hawaii

  • Average Social Security benefits: $1,548.42

  • State tax on Social Security benefits: No

  • Median home list price: $720,144

  • Median property tax rate: 0.26%

  • Estimated property tax: $1,872

  • Cost-of-living index: 201.3

  • Average annual healthcare spending: $8,183

  • State sales tax: 4.44%

Read More: The Average Retirement Age in Every State

5. Nebraska

  • Average Social Security benefits: $1,564.11

  • State tax on Social Security benefits: Benefits are not taxed for joint filers with an AGI of $58,000 or less and for single filers with an AGI of $43,000 or less.

  • Median home list price: $176,365

  • Median property tax rate: 1.76%

  • Estimated property tax: $3,104

  • Cost-of-living index: 91.7

  • Average annual healthcare spending: $6,741

  • State sales tax: 6.93%

4. Vermont

  • Average Social Security benefits: $1,590.36

  • State tax on Social Security benefits: Benefits are not taxed for single filers making less than $45,000 and for joint filers making less than $60,000. Taxes increase incrementally as income rises, until it reaches $55,000 for single filers and $70,000 for joint filers — then benefits are taxed regularly.

  • Median home list price: $265,046

  • Median property tax rate: 1.59%

  • Estimated property tax: $4,214

  • Cost-of-living index: 115.5

  • Average annual healthcare spending: $6,829

  • State sales tax: 6.22%

3. Rhode Island

  • Average Social Security benefits: $1,604.47

  • State tax on Social Security benefits: There’s no tax on Social Security benefits for single filers with up to $83,550 in AGI and for joint filers with up to $104,450 in AGI.

  • Median home list price: $307,341

  • Median property tax rate: 1.35%

  • Estimated property tax: $4,149

  • Cost-of-living index: 118.5

  • Average annual healthcare spending: $7,251

  • State sales tax: 7.00%

2. California

  • Average Social Security benefits: $1,497.19

  • State tax on Social Security benefits: No

  • Median home list price: $565,250

  • Median property tax rate: 0.74%

  • Estimated property tax: $4,183

  • Cost-of-living index: 139.8

  • Average annual healthcare spending: $7,707

  • State sales tax: 8.66%

1. North Dakota

  • Average Social Security benefits: $1,509.26

  • State tax on Social Security benefits: North Dakota taxes Social Security benefits to the same extent as the federal level.

  • Median home list price: $241,522

  • Median property tax rate: 1.42%

  • Estimated property tax: $3,430

  • Cost-of-living index: 96.6

  • Average annual healthcare spending: $7,605

  • State sales tax: 6.86%

More From GOBankingRates

Methodology: GOBankingRates ranked all 50 states on four main factors affecting retirees: taxes, living expenses, healthcare and Social Security. In the taxes category, the data examined included: (1) average state sales tax rates, sourced from the Tax Foundation; (2) median property tax rates, sourced from the Tax Foundation; (3) estimated annual property tax based on the median home value, sourced from Zillow; and (4) state taxes on Social Security benefits, sourced from Kiplinger. In the living expenses category, the data examined included: (5) the median value of single-family residences as of December 2019, sourced from Zillow; and (6) each state’s cost-of-living index value, where the U.S. average is 100, sourced from the Missouri Economic Research and Information Center. To capture (7) healthcare costs in each state, GOBankingRates multiplied the Bureau of Labor Statistics’ Consumer Expenditure Survey estimate of total annual spending on healthcare by people ages 65 and older by each state’s healthcare cost index, according to MERIC. To capture the impact of Social Security, GOBankingRates ranked states on their (8) average monthly benefit payment for retirees. For all the factors above, except for the average Social Security payment, smaller values — lower taxes, lower living expenses and lower healthcare costs — were scored as more desirable. For Social Security, higher payments were scored as more desirable. GOBankingRates’ final ranking was determined by each state’s cumulative score on all of the factors. Factors No. 4 and No. 7 were weighted double to create each state’s final score. All data used to conduct this study was compiled and verified on Jan. 29, 2020.

This article originally appeared on GOBankingRates.com: Avoid These 30 States in Retirement If You Want To Keep Your Money