Retirement is the late-age opportunity to say goodbye to working life tension and hello to a life of leisure — maybe.
Most people retire between the ages of 63 to 65. The typical American has about $50,000 saved for their retirement. About a quarter of Americans, however, have less than $5,000 saved.
And about 15% of American workers have absolutely nothing saved for their retirement. About one in five are dependent on Social Security for all of their retirement income.
Unsurprisingly, more than half (55%) of Americans think they will have to work part-time throughout their retirement so they don’t outlive the funds they do have.
Unfortunately, just because you responsibly amass a retirement fund over a working life doesn’t mean that you get to spend it all yourself.
It’s hard out here for a retiree. But if you know how the system works, then you can make it work for you. There are many states that don’t tax any type of retirement income for example.
If you do enough research, you will find many states that do not have an income tax which in turn negates the ability to tax retirement income.
However, not every state is equal. Some states won’t tax retirement income as long as you don’t withdraw early. Or they may tax one type of retirement income versus another.
Other states may have a negligible income tax which may affect retirees working part-time if not their retirement fund. Consult with a financial advisor before you move to a state as a retirement income tax exile.
Here are five states that do not tax retirement money and selected other taxes per Kiplinger.
Alaska
Ok, Alaska is probably not on your list of places to settle for your retirement. But you should keep an open mind.
Alaska has no income taxes and doesn’t tax any kind of retirement benefit.
Average combined state and local sales tax rate: 1.76%. Median property tax rate: $1,182 per $100,000 of assessed home value.
Florida
Florida is the typical state most people think about when it comes to retiring, and for good reason. There is no taxation on income or retirement benefits.
Average combined state and local sales tax rate: 7.08%. Median property tax rate: $830 per $100,000 of assessed home value.
Mississippi
Mississippi won’t tax any retirement income so long as you don’t withdraw before the age of 59½.
Average combined state and local sales tax rate: 7.07%. Median property tax rate: $787 per $100,000 of assessed home value.
Nevada
Nevada does not tax any retirement income.
Average combined state and local sales tax rate: 8.23%. Median property tax rate: $533 per $100,000 of assessed home value.
South Dakota
You won’t have to worry about your retirement income being taxed here either.
Average combined state and local sales tax rate: 6.4%. Median property tax rate: $1,219 per $100,000 of assessed home value.
