If you’re relocating for retirement, does it make sense to see to what extent your Social Security benefits will support your lifestyle? Yes, because there are number of factors to weigh.
Some 11 states tax Social Security benefits to some degree. Most states, however, don’t count Social Security benefits in state income tax calculations.
How much you are taxed depends on your household adjusted gross income (AGI) and your age. In Kansas, for example, if your AGI is $75,000 or less, you won’t have to pay taxes on your Social Security income.
Filing status is also important. Missouri won’t tax Social Security benefits if you’re filing jointly and your AGI is above $100,000 ($85,000 for single filers). So if you’re eyeing moving to another state, you’ll need to do some tax planning if your main source of income is Social Security, which is a real challenge in many states.
Although looking at averages can be misleading, it doesn’t hurt to see where your benefit levels will have more purchasing power. If you live in Florida, where there are about 5 million residents receiving Social Security benefits, the average payment is just more than $1,500 a month, according to a survey by GoBankingRates.com . In contrast, the average in New Jersey is about $1,700.
Does that mean that Social Security is more generous in the Garden State? Not really. It has more to do with math (division) than higher benefits. To answer the “more bang for your buck question,” you need to look at purchasing power by state. How much does housing, long-term care, food and other essential items cost?
Of course, some states are on the high-end when it comes to cost of living, particularly if you were to start with housing. California, for example, will not dominate the “most affordable” list. Neither will Alaska, Massachusetts or Washington.
Want to make a move based on purchasing power? Consider Iowa, Delaware, West Virginia, Missouri and Mississippi. These states made Bankrate’s “best states to retire list” in 2023.
Why Iowa? Lower average housing costs were a big plus, but was one factor among many. According to Bankrate,”Iowa is the sixth cheapest place to live in the U.S., according to the Council for Community and Economic Research , which is an advantage for retirees on a fixed income. Iowa’s median home price is $239,400, per Redfin data — well below the nationwide median home price of $388,800. Homeowners insurance in Iowa is also below the national average.”
If you want to make a move for a retirement locale, don’t look exclusively at the prevailing weather in states you’re considering. Examine the tax, cost-of-living and social/health infrastructure as well. It’s a holistic financial decision as well as an emotional one. Let reason and sound financial planning be your guide.
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Want to make a move based on purchasing power? Consider Iowa, Delaware, West Virginia, Missouri and Mississippi.”
IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021.