3 Tips for Retiring out of State to Save Money
By: Monica Victor
It’s December and besides planning for the holidays, we’re hearing a lot about taking some time to get ready for retirement.
December 31st is the deadline to contribute to your 401(k), the deadline to play catch-up and deposit contributions to your 401(k) and the deadline to take the required minimum distributions from your 401 (k) if you’re over 70.
As you hasten to meet the deadlines, you may also be thinking of how you want to live and where you might want to spend your time to make it absolutely golden. Many dream of basking in the Florida sun while others flock to the Copper State and home of the Grand Canyon – Arizona.
However, a report by Bankrate says when you factor in cost of living, healthcare, crime and humidity, the best place to retire is South Dakota.
“Different states have different tax laws and other regulations that can have a major impact on your retirement funds,” Rodger Friedman, founding partner and wealth manager at Steward Partners Global Advisory and author of Forging Bonds of Steel says. “You need to be aware of these as you plan for where you want to live and how you want to live.”
Regardless of where you plan to spend the last years of your life, Friedman says there are three things you must consider as you plan ahead.
• Know the income tax rules of the State.
Each state has its own tax rules. Before you decide to take up residence in a new state do your tax homework. States like South Dakota, Wyoming, Nevada, Texas, Washington, Florida, and Alaska have no state income tax while the others do.
Also, what may be considered an itemized deduction in one state may not be an itemized deduction in another. A good measure would be to consult a reputable and experienced CPA for guidance if you use the long form (1040) to file federal income taxes.
You want to make sure you get the most of your retirement income. States differ on taxing interest income from tax-free municipal bonds. Some states give tax credits; treat public and private pensions differently; or offer federal, military or blanket exclusions. Be sure to look into how your new state taxes retirement income.
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