By John Brady
3:44 p.m. CDT April 19, 2014
KSDK
Finding the best place to retire in is a little bit like looking for a mate. There are lots of pretty ones out there. To help weed out the more unattractive ones, we present our third annual (we skipped 2013) list of the worst states for retirement.
There is one main point we want to emphasize – everyone’s retirement situation is different, so a one size fits all approach won’t work. If your grandchildren live in one of these states and you want to be near them – that makes it a great retirement state for you.
Factors we considered:
• High property taxes: If you own property, you can’t avoid these taxes. No matter how high or how low your income, you will pay taxes based on the value of your home. Since retirees generally don’t have a lot of income, this is our No. 1 negative consideration.
• Taxation of Social Security & pension/retirement income: Just about everybody in America will receive Social Security in retirement. It’s generally not that much (in 2014, the average couple on Social Security receives $2,111 a month), so the taxes on that income is usually not a critical factor. However, for the fortunate, but shrinking, number of people receiving defined benefit pensions, taxes on those pensions could be a deciding factor on where you decide to retire. The type, and where that pension comes from, has a big effect on state taxation.
For example, is it from in or out of state, or is it a military or other government pension? Even more people are likely to be affected by the taxation of retirement benefits, such as the recommended mandatory distributions (RMDs) that you must start taking the year you reach age 70-1/2. State taxation of pensions and distributions from 401ks, IRAs, etc. is all over the map and difficult to research. On these matters, you should use a tax professional to help make sure you get the most accurate information.