Your clients may have most of their ducks in a row – retirement accounts, life and health insurance, Social Security and asset draw-down strategies – but have they decided for sure they’ll be staying in place?
Different states’ taxes, costs of living and unique expenses can drastically affect portfolio longevity and ideal income strategies, and moving is a popular option among today’s retirees. In fact, a Brookings Institute study on aging in the United States showed that 31 metropolitan areas saw their senior populations grow by more than 25 percent between 2000 and 2010. In comparison, the same study found that the 65 and older crowd grew by just 15 percent nationwide.
Why do imminent and even current retirees often decide to move? The reasons differ from one family to the next, but a variety of tax burdens are top concerns, especially for well-to-do seniors. “Financially speaking, property tax is one of the biggest reasons to start the search,” said Hank Parrot, Estate and Financial Strategies President. Louisiana, Alabama and South Carolina are popular retirement spots with little to no property tax, while New Jersey, New Hampshire and Texas have some of the highest rates, for example.
For retirees of both substantial and average means, income tax is often an even greater concern. “The most important consideration is to look at your income and tax levels and determine what your costs will be in different states,” said Christopher Cannon, RetireRight Pittsburgh Wealth Management Advisor. “Social Security, private pensions, government pensions, IRAs, 401(k)s and other assets will all be taxed differently.” A few states have no income tax at all, while others still tax interest and dividends, a key distinction for well-invested clients. On the other hand, seniors who’ll be living on fixed incomes may want to consider Mississippi, Tennessee and other states that exclude Social Security and pensions from their income taxes.