Retirement planning involves saving and investing wisely during your heyday to build a nest egg that can support you when you stop working. It also involves researching retirement places to consider, as well as those to avoid. Many of these locations are great to visit, but you’ll want to study the impact factors such as cost of living, housing and tax rates, which will have an impact on your ability to live comfortably or not. If you want to get the best value for your retirement money, here are nine U.S. states you should avoid upon retirement.
1) New York
Cheap is something you can never relate to the Big Apple. It may be a relatively safe state, but in the entire United States, the five boroughs and Long Island are among the most expensive places to live.
The tax rate and cost of living are also extremely high in New York. In fact, state and local income taxes in New York are the highest in the US while property taxes rank fourth highest in all 50 states. In 2014, cost of living in the Big Apple soared 120.4% above the national average. Moreover, health care and housing, which are two of the most important staples for seniors, are very expensive in New York. According to reports, a married couple aged 65 years old who retire in New York would be facing health care costs amounting to $413,597. This is 4.7% higher than the national average.
2) Washington, D.C.
While not a state, the US capital is a US location that must be mentioned when advising places to avoid if you want to stretch those retirement dollars. The nation’s seat of power comes a close second to New York City when it comes to high cost of living.
They also have the second-highest median home value of $424,400 after Hawaii. The D.C. area, while having the highest average income for people 65 years and older, also has a high poverty rate among seniors at 14%. The Tax Foundation also reported that D.C. has one of the highest income tax rates in the United States at 8.9%. Even the sales tax is high at 5.75%. Moreover, estates valued at $1 million and above are subject to estate tax, which can go over 16%. Nevertheless, social security benefits and pensions, up to $3,000 of military, federal, and pensions, are exempted from taxes. Peace of mind is also something elusive in the state capital, as violent crimes occur at 3.5 times the national rate. Property crime rate is higher than average in D.C., too.
The high taxes in California has made “California dreaming” more of a nightmare. Even income of retirees is fully taxed, and apparently, the highest state income tax rates in the entire United States are imposed in the Golden State.
Currently, sales tax is at 7.5% and in Californian cities and counties where local levies are collected, sales tax can go as high as 10%. Aside from skyrocketing taxes, the high cost of living is high in California, too. In fact, they come a close third when it comes to highest cost of living behind New York and the District of Columbia. Even home values are high. The median home value is $368,600 in California, which is more than double the national median. Rental fees are also steep, so retirees who don’t have their own homes would be facing the burden of high rent.