The Best and Worst US States for Retirees

The Best and Worst US States for Retirees

According to data published by Northwestern Mutual in 2019, 83 percent of Americans admit falling short of the $1 million retirement pot recommended by experts. With 14 percent of Gen X-ers and baby boomers with no retirement savings at all, retiring to a more affordable, tax-friendly state is an increasingly popular option.

Social Security income rates are the same regardless of where recipients live, but some US states are more tax-friendly than others. Moving to a new state can have significant financial benefits, or pitfalls, for retirees. We look at a selection of the best US states to retire to in terms of affordability, as well as identifying the worst, according to recent polls.

Best: Nebraska

With an average temperature of 49 degrees, Nebraska is no Hawaii. But what the state lacks in weather, it more than makes up for in other areas, including affordability, culture, wellness, and crime.

Nebraska has higher property taxes than several other states. In Nebraska, retirement income, including Social Security benefits, is subject to state income tax. However, according to the National Association of Realtors, the average house price in Lincoln, Nebraska’s capital, was just over $199,000 in the second quarter of 2019. This is $80,000 less than the national median price.

According to one report published by Bloomberg, Nebraska ranks as the best state in the US for retirement overall, achieving a high score for affordability. The Bankrate report, which was produced using Council for Community and Economic Research Statistics, took into account a variety of factors, including culture, wellness, and crime, ranking Nebraska the #1 state overall.

Best: Iowa

Iowa ranked #2 in Bankrate’s list of the best US states to retire, ranking #8 for affordability, and within the top 20 states in terms of culture. Financial advice and wealth management firm Blacktower Group ranked Iowa #1 in its list of top states for retirees. It based scores on five key factors: average home prices, crime rate, proportion of population over 60, cost of living, and life expectancy.

Best: Missouri

Missouri ranks #18 in terms of the most taxpayer-friendly states. It fully taxes withdrawals from retirement accounts and private pensions as well as partially taxing public pensions. However, single seniors earning less than $85,000 per year and jointly filing couples earning less than $100,000 benefit from full tax exemption on Social Security retirement income.

Missouri offers unique benefits for veterans, providing state and federal assistance through its VA centers and providing housing at Fort Leonard Wood. Military retirements and GI Bill benefits are tax exempt throughout the state of Missouri.

Worst: New York

New York’s high cost of living presents challenges to residents of all ages, but in retirement, the issue is amplified. New York ranked 50th in terms of tax-friendly states in a report compiled by the Tax Foundation, although it scored #1 for access to culture and has a relatively low crime rate.

Alongside New Mexico, Arkansas, Louisiana, and Maryland, New York was ranked within the worst 5 US states to retire. It ranked last in terms of affordability, and second-to-last in terms of tax-friendliness.

For those seeking an effective boost to their retirement savings, a Malta Retirement Plan (MPP) is a tax favored retirement account that has particular incentives for high-income taxpayers. With no income or contribution cap, little wonder why financial experts across the US recommend MPPs as the new, supercharged Roth IRA.