Americans Retire Earlier in These 2 States — Should You Move There?
Written by
John Csiszar
Edited by
Amber Barkley
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Early retirement has been generating a lot of buzz in recent years, as stories of those advocating the “FIRE” movement — short for “financial independence, retire early” — retiring in their 40s or even 30s have caught the attention of many. But while that type of early retirement requires an immense amount of self-sacrifice and aggressive saving, more traditional retirees can still hang up their work boots in their early 60s without having to live such a difficult life, especially in states like Alaska and West Virginia.
But why are these two states in particular such havens for early retirees, and is it enough that you should consider moving there? Read on to learn more.
Alaska
Alaska is a bit of an outlier when it comes to American states. Separated from the contiguous 48 states by a wide swath of Canada, Alaska is unique in nearly every way. But there are some financial aspects to living in the state that make it particularly attractive to retirees.
For starters, Alaska has the highest retirement income — other than Social Security — of any state, at $16,374. Only Washington, D.C. has a higher non-Social Security income, at $19,716. And while expenses in Alaska have a reputation of being high, in recent years, costs have actually come down relative to other states. Now, seven states, plus the District of Columbia, are actually more expensive than Alaska, which has an annual cost of living just 4.4% above the national average.
Alaska has no state sales, income or estate taxes, helping keep the tax burden low on retirees. Even better, the state offers seniors a significant break on property taxes. Specifically, the first $150,000 of assessed value is totally exempt from property taxes, although you’ll have to be 65 or older to take advantage of this provision.
Lastly, the Alaska Permanent Fund, which is funded by the state’s vast oil wealth, pays out annual checks to residents based on its investment performance. While in most years, residents can expect to earn at least $1,000, in 2022, the fund paid out a record $3,284 to every qualifying resident.
All in all, the financial benefits of retiring in Alaska — coupled with the state’s vast natural beauty — are making it a hotspot for American seniors.
West Virginia
On the surface, West Virginia couldn’t be more different from Alaska. Yet it, too, is attracting a large number of early-retiring seniors.
Perhaps the biggest benefit for West Virginia retirees is the state’s homestead exemption, which provides property tax relief for eligible residents aged 65 and older. Specifically, the state offers an exemption from property taxes on the first $20,000 of the value of a homestead. While that might not seem like much — and it’s a lot smaller than Alaska’s $150,000 homestead exemption — it’s important to remember that home values in West Virginia are also much lower, averaging just $158,668 according to Zillow.
West Virginia doesn’t tax Social Security benefits, and it provides an exemption of the first $8,000 of retirement income from state taxation, as well. Both of these help seniors enjoy a better life in the state.
One final plus in the West Virginia column is the state’s cost of living. In multiple studies, West Virginia ranks in the top 10 most affordable states in America. This can make a huge difference in the life of someone who wants to retire early.
Should You Consider Moving to One of Those States?
Whether or not you should consider moving to Alaska or West Virginia to retire early is a personal decision. There’s no denying that both states offer significant financial advantages to seniors.
However, you’ll have to counter those with things like distance from friends and family, lifestyle and weather, among many other factors. Also, it’s important to note that some of the financial benefits offered by these states, such as property tax exemptions, don’t kick in until you reach age 65 anyway.
Final Thoughts
Regardless of where you choose to retire, if you want to retire early, you’ll have to make some sacrifices to get there. Retiring “early” means that you’ll have to live off your savings and investments until some of your other benefits kick in, like Social Security at age 62 — if you so desire — and Medicare at age 65.
Maxing out your 401(k) or IRA, keeping discretionary spending in check and prioritizing your retirement are all ways to help you reach your goal, whether you want to retire in Alaska, West Virginia, California or Florida.
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