For some people, retirement means being able to wake up and walk out to the beach. For others, it means living close to the country’s best fishing spots or a world class golf course. For still others, it may mean a secluded cabin in the mountains. Whatever your dream retirement location looks like, be sure that you take into account the financial implications of your choice of location as well.
There are a wide variety of costs that should be considered when you start thinking about where to retire. The cost of housing in your dream location is usually at the top of the list. After that, the overall cost of living and specifically the cost of healthcare is something most people think about. One thing that many future retirees don’t stop to consider is the income tax implications that your choice of retirement location can have.
Of course any federal income taxes you owe will not be determined by where you live; however, most states also impose an income tax obligation on residents of the state. As of 2013, seven states do not impose any income tax on residents –Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Residents of New Hampshire and Tennessee only pay taxes on dividends and interest income. For retirees with a moderate to large estate, state income tax can have a substantial impact on their income during their golden years.
Be sure to take state income taxes into consider when you make your final decision where to retire.