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January 1, Seniors Beware: Here Are the 6 Worst States for Retirees

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Many retirees rely on income sources from retirement funds like 401(k)s or IRAs, or other private and public funds like pensions or Social Security benefits. But it’s important to know that some states tax these income sources more than others.

Ideally, your retirement should be as stress-free as possible. So when you choose where to spend those years, it’s a good idea to not only consider state tax laws, but also estate taxes and the area’s overall cost of living.

Read on to learn which states are the worst for seniors looking to make their retirement savings last as long as possible, as compiled by The Senior List.

Hawaii

  • State income tax: 1.4% to 11%
  • Median property tax: 0.31%
  • Estate tax: 10% to 20%

While spending your retirement in a lounge chair on the beach with a tropical beverage in-hand may sound ideal, it can also be pretty costly.

Hawaii has a graduated income tax system — meaning the more you make, the more taxes you pay, up to 11%. Income from Social Security and public pension are tax exempt in the state, so that’s a positive. However, private pensions and retirement funds like 401(k)s and IRAs are fully taxed.

Living in Hawaii is expensive — with housing costs 222% higher than the rest of the country.

Connecticut

  • State income tax: 3% to 6.99%
  • Median property tax: 1.76%
  • Estate tax: 12%

While it has a lot of scenic sites to offer, Connecticut is also particularly aggressive when it comes to taxes for retirees.

Social Security income is taxed at 25%, the estate tax is 12%, and property tax is 1.76% — the third-highest in the country. On the plus side, the state recently made pension income tax-exempt for seniors with less than $75,000 of annual income ($100,000 for joint filers). The same applies to IRA accounts up to 25%.

While Connecticut’s bolstered its tax exemptions for retirees within the last few years, it also has a relatively high cost of living — 22% higher than the national average.

Maryland

  • State income tax: 2% to 5.75%
  • Median property tax: 1.04%
  • Estate tax: 0.9% to 10%

History buffs and crab cake-lovers alike would find a lot of reasons to enjoy spending their retirement years in Maryland. While it is largely considered to be a tax-friendly state for retirees, given that Social Security and 401(k)s are exempt, people with other retirement income may find it a tad pricy.

Those with IRA income over $34,300, a public pension, or other retirement accounts will pay a lot higher of a price. Additionally, Maryland has an estate tax of up to 10%.

New York

  • State income tax: 4% to 10.9%
  • Median property tax: 1.38%
  • Estate tax: 3.06% to 16%

This entry may not be a surprise to you, but it makes the list nonetheless. Income from private retirement funds (including IRAs, pensions, or 401(k)s) of $20,000 or more could be taxed up to 10.9%.

New York’s cost of living is exceptionally high. The state’s property taxes are the sixth-highest in the country, and its combined local and state sales tax is 8.52% — the 10th highest in the U.S.

While Social Security benefits, federal pensions, and military retirement plans are exempt from taxes, the state’s housing costs are 258% higher than the national average.

Kansas

  • State income tax: 3.1% to 5.7%
  • Median property tax: 1.32%
  • Estate tax: N/A

Under Kansas tax laws, in-state public pensions, federal pensions, and military pensions are all tax-exempt.

But private retirement funds, including 401(k)s, IRAs, and out-of-state public pensions, are fully taxed. Additionally, Kansas has the ninth-highest local sales tax in the U.S., as well as the 13th-highest property tax rate.

New Jersey

  • State income tax: 1.4% to 10.75%
  • Median property tax: 2.21%
  • Estate tax: 11% to 16%

Between Ellis Island and Atlantic City, New Jersey has a lot to offer. While most retirement income is taxed, the state allows deductions for most income sources, including retirement accounts, private pensions, and IRAs.

However, New Jersey has a significant estate tax and the highest property tax in the nation — 2.21%.


Source: MSN

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