There are many ways that the average retiree can make their money stretch in retirement. One way to make your money go farther in retirement is to put down roots where the cost of living is lower.
Areas with lower costs of living can be a result of a few factors. For example, general consumer goods could be inexpensive in certain regions of the country. Another factor that can contribute to lower costs of living is tax rate.
Tax-friendly regions can exist in different ways. There are some states that have little to no income tax, while others have much lower rates for sales tax or property taxes.
Depending on your financial circumstance, you might want to figure out what “tax-friendly” means for you. If the bulk of your income is earned, you may want to relocate to a state where there is not much income tax. If you are a big consumer, you might consider living where sales tax on consumer goods is lower.
Either way, here is a list of ten states worth exploring for unusually lower tax rates in one or more category. Here they are in no particular order.
This state has no income tax and the property taxes are said to be some of the lowest in the entire nation. The state also boasts lower taxes on such goods as car fuel, food, and alcoholic beverages.
There’s also no estate or inheritance tax in Wyoming. Retirees might also like to know there is no tax on Social Security benefits.
This is another state that has no income tax, and the average sales tax comes in at under 2%. As a resident of Alaska, you are also eligible to receive what’s called a Permanent Fund dividend, which can be anywhere from $1,000 to $2,000 each year. There’s also no tax assessed on Social Security income.
3. South Dakota
Residents of South Dakota do not pay any income tax. Property taxes on median home values just below $130,000 come in at under $2,000 per year on average. Social Security benefits are not taxed in South Dakota.
It’s true. There’s no income tax in the lovely Sunshine State. However, average sales tax comes in slightly higher than other lower tax states at right under 7%.
Property taxes are still reasonable, though there are some pockets with extremely high-priced real estate. This is another state with no tax on Social Security benefits.
5. North Dakota
This is not an income tax-free state. However, the income tax rates are still pretty low, coming in at under 2% for residents of the state on average. Sales tax is typically just below 7%, while Social Security benefits are taxed at the federal level and at applicable rates.
In Nevada, not only can you expect reasonable home prices, but you can also expect to get a break on paying income tax. Social Security benefits are not taxed either. However, the average sales tax comes in at just under 8%.
With property tax rates below the national average and income tax rates that average less than 1% in some places, the Grand Canyon state sounds like an ideal state to relocate to. Combined state and local taxes bring sales tax in at an average of just a little over 8%. Social Security benefits are not taxed.
Louisiana’s property taxes are the third lowest in the nation. In addition, income tax rates are between 2%-6% percent, though there are deductions available for federal taxes. Just be aware of state and local taxes, which come in pretty high at almost 10%. Fortunately, Social Security benefits are not taxed in Louisiana.
This state taxes its residents, on average, starting at 2% for income tax. It climbs to over 6% for taxable income over $60,000.
The unique thing about Delaware is that there’s no sales tax, which can be good for those looking to save money on consumer goods. Property taxes on homes in the $230,000s would be around $1,200 per year. Social Security benefits are not taxed in Delaware.
Mississippi sales tax is around 7% and, unlike many other states, includes things like motor fuel, prescription drugs, and groceries, yet residential utilities are exempt. Income taxes are between 3% and almost 5%, depending on income level. Social Security benefits are not taxed in Mississippi.
As you can see, there are plenty of options for the retiree who wants to get more bang for their retirement buck. If relocation is an option, there are some great states to choose from on this list.
If you’re not able to relocate to a state with lower tax rates, there are still other ways to support your lifestyle in retirement.
Whether you live in one of these states or not, you could be eligible for a reverse mortgage. A reverse mortgage is a financial product that enables you to use your home’s equity to receive cash payments each month.
Aja McClanahan is a freelance writer and owner of www.principlesofincrease.com.