Florida
It’s long since been known that seniors prefer retiring to Florida. And it’s not all because of the state’s pleasant weather, the overabundance of lovely beaches and large senior communities, though all of these definitely will make your golden years even more enjoyable.
In terms of taxes, Florida is one of the best picks for retirees. The Sunshine State doesn’t have an income tax, so don’t worry about bleeding money out of your pension at all.
What’s more, there are no state taxes on distributions, so your 401(k) and IRAs as equally as safe. And, finally, your Social Security benefits won’t be taxed either.
Hawaii
You might have a difficult time finding an affordable place to settle down in Hawaii. Here, housing is known to be quite expensive, but you might be able to cut down on such expenses if you decide to rent instead.
Private or public pension plans? If you retire in the Paradise of the Pacific, it won’t tax you on those as long as you don’t make contributions to the plan. What this means is that you will be taxed on any portion of your pension income attributable to employee contributions you made.
What about 401(k) plans? If your employer made matching contributions an additional state deduction may be available for the employer-funded portion of distributions. As for IRAs, if you’ve decided to roll over your tax-free pension into an IRA, your IRA distributions will also be tax-free.
401(k) and IRA plans will be, for the most part, treated the same for Hawaii tax purposes as they are for federal tax purposes. Your Social Security benefits will not be taxed, by the way!
In terms of income tax ranges, the lowest range in the Aloha State is 1.4% on taxable income up to $4,800 for joint filers and $2,400 for singles. The highest rate is 11% on more than $400,000 of taxable income for joint filers and $200,000 for single filers.
So, does it sound like your retirement will be paradise if you settle down here?
