One of the perennial questions Americans ask is, what are the best states to retire in financially? In order to help answer this question, Credit Karma conducted a study of the best and worst states to retire, which analyzed all 50 states across 20 different, pertinent factors, running the gamut from the overall cost of living in the state to the percentage of inhabitants 65 and older living below the poverty line to costs of elderly healthcare, and much more. Below is a list of the 5 best states to retire in the U.S. according to the study:
- Delaware
- Florida
- New Hampshire
- Wisconsin
- Hawaii
The full list of all the best and worst states to retire provides a more thorough breakdown of all 20 factors that went into the report. Here’s a look at some of the findings that stood out the most when it comes to the best states to retire in the U.S.
States That Do Not Tax Social Security
One of the prime characteristics of the states that ranked among the best states to retire is that Social Security income is not taxed. States that don't tax Social Security include 9 out of 10 of the top-ranking states in the study, with the No. 9 best state to retire in Vermont being the one that does have a tax, though it has a graduated system of Social Security exemptions that come into effect if a taxpayer’s income is below $34,000 when filing single and below $44,000 if filing jointly.
States That Do Not Tax Retirement Income
Several of the best states to retire also cut retirees a break on other sources of income in retirement, besides Social Security. The No. 2 best state to retire in the study — Florida — boasts no state income tax, which also makes it one of the states that do not tax pensions. Similarly, the No. 3 best state — New Hampshire — does not levy taxes on pensions, income from a retirement job, or distributions from retirement accounts. New Hampshire does, however, tax dividends and interest, but otherwise is easily one of the best states to retire tax wise. The No. 6 best state — Pennsylvania — also typically exempts IRA withdrawals and 401k distributions if you draw them after age 59-and-a-half.
The Best States to Retire Have Strong Social Programs and Support for Retirees
States that don't tax social security and states that don’t tax retirement income stand out, but so do states that possess socio-economic programs and conditions that are conducive to healthy, fulfilling livelihoods for retirees. The poverty level among residents aged 65 and older was one of the 20 factors in the study, and it is no coincidence that the top-10 best states to retire in tend to have the lowest rates of impoverished retirees. Six out of the top-10 best states to retire boast the lowest shares of 65-year-old and older adults who live below the poverty line, with Vermont reporting the lowest at 6.1%.
Access to healthcare and affordability is naturally very important to retirees. One of the worst circumstances an elderly American may find themselves in is having to avoid healthcare due to its cost. When it comes to the best states to retire in, the percentages of adults aged 65 and older who avoided care due to cost are much lower than average. In No. 1 Delaware, only 3.6% of adults aged 65 and older avoided getting care due to its cost; meanwhile in New Jersey, which ranked among the worst states to retire, 8.2% of 65-year-olds and older avoided healthcare for this reason.
SNAP (Supplemental Nutritional Assistance Program) can be an important lifeline for many American retirees. In many of the best retirement states, SNAP has extremely high rates of reach among the elderly population that’s in poverty. For example, Florida, Hawaii, Maryland, and Pennsylvania, which all rank in the top-10 best states to retire in the U.S., SNAP reaches all 100% of adults ages 60 and older who are in poverty in those states. By way of comparison, in California, SNAP’s reach covers only 42.5 participants per 100 adults aged 60 and up who live in poverty.
The Cheapest Places to Retire Aren’t Always the Best
Factors like cost of living and costs of healthcare — especially in-home care, community and assisted living, and nursing home facilities — are very important when considering what are the best states to retire in. Obviously, saving money on healthcare and overall living costs is a big part of making your retirement nest egg last. But states with low cost of living or cheap healthcare costs can also falter when it comes to the quality and access to important senior health services. For instance, Alabama has the lowest average costs of senior healthcare across the board, but it doesn’t prevent the state from suffering from higher-than-average rates of healthcare avoidance due to cost, food insecurity among seniors, and adults ages 65 and older living below the poverty line. So, when it comes to cost of living and healthcare, don’t just choose the states that are the cheapest, because the quality of the care and lifestyle often suffers. Balance is key.
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