Alabama
Luckily for retirees in the state of Alabama, Uncle Sam will not tax your pension income if you’re retiring from the private sector if it comes from a defined benefit retirement plan. This is particularly advantageous for those who will rely heavily on their pensions during retirement.
In addition to that, you’ll also be exempt from military retirement pay and income from a list of specific government pensions. The cherry on top? The Yellowhammer State won’t touch your Social Security, either!
There are some drawbacks, however. Have you got a traditional IRA or/ and a 401(k) plan? Then Alabama will tax your distributions as ordinary income with some exceptions which will only be partially taxable.
Any ordinary income, including the earlier mentioned 401(k) and traditional IRA distributions, the lowest tax rate is 2% on up to $1,000 of taxable income for joint filers and up to $500 for anyone else. The highest rate is 5% on more than $6,000 for joint filers or $3,000 for everyone else.
All in all, Alabama is a pretty good place for seniors to settle down in!
Alaska
Think you can handle long, cold weather during retirement? Well, that’s all fine and dandy, but what about specific taxes?
Luckily, you don’t have to worry about that, at least not if you’ll heavily rely on a pension if you want to move or already live in Alaska. Want more good news? As it turns out, The Last Frontier doesn’t have income taxes, meaning that even your 401(k) and IRA distributions are safe.
And, of course, this means that Uncle Sam won’t touch your Social Security benefits either.
We really think it’s worth putting up with the weather in Alaska for these sorts of financial benefits!
