This article takes a look at the 5 worst states to retire on social security. If you wish to check out our detailed analysis on the shifting trends of middle America, Boomer moves, and financial considerations, you may go to the 15 Worst States to Retire On Social Security.
5. New York
Insider Monkey Rank: 7.9
Cost of Living Index: 126.5
Health Index: 108.4
Tax Friendliness: Moderately Tax Friendly
One of the most expensive states to live in the United States is New York. The cost of living in the state is 26.5% higher than the national average. Social security benefits are exempt from taxation here. However, private pensions and income from retirement accounts are deductible up to $20,000. Moreover, sales and property tax rates are both higher than the national average. There is an estate tax as well.
4. Maryland
Insider Monkey Rank: 7.9
Cost of Living Index: 114.8
Health Index: 101.4
Tax Friendliness: Moderately Tax Friendly
Retirees on a fixed income will have trouble retiring in Maryland as its cost of living is 14.8% higher than the national average. Some types of retirement income, including social security and 401(k) distributions, are exempt from taxation. Other types, such as income from an IRA, are fully taxed. Public pension income is partially taxed, and private pension income is fully taxed. Maryland also happens to be the only state with both an estate and an inheritance tax.
3. Montana
Insider Monkey Rank: 8.45
Cost of Living Index: 103.1
Health Index: 97.7
Tax Friendliness: Moderately Tax Friendly
Even though the cost of living in Montana is only 3.1% higher than the national average, the state earns a spot on our list because of the low-income threshold for Social Security tax exemptions. Moreover, income coming from pension or retirement accounts is treated as regular income and taxed at the state’s income tax rates. Any capital gains are also taxed as income, but taxpayers can receive a credit of 2% net capital gains.
2. New Hampshire
Insider Monkey Rank: 9.1
Cost of Living Index: 115.6
Health Index: 107.5
Tax Friendliness: Tax Friendly
Bearing a cost of living that is 15.6% higher than the national average, New Hampshire is another unpopular state to retire to. Retirement income, including social security, isn’t taxed at the state level. However, seniors who receive investment income may be subject to taxes. The state also has some of the highest property tax rates in the country. Sales tax, however, is nonexistent.
1. California
Insider Monkey Rank: 9.3
Cost of Living Index: 136.4
Health Index: 109.1
Tax Friendliness: Not Tax Friendly
California is one of the worst states to retire on social security. The cost of living in the state is 36.4% higher than the national average, making it almost impossible for retirees to survive on their fixed incomes. The state isn’t tax-friendly either. Income from retirement accounts and pensions are subject to some of the highest state income tax rates in the country. Sales tax is one of the highest in the state as well. However, social security benefits are exempt from taxation.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a peek at 25 States with the Lowest Life Expectancy in the US and 15 Best States to Retire on Social Security.
