5 States With the Most Affordable Retirement Communities
Written by
Heather Altamirano
Edited by
Gary Dudak
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When planning for retirement, people often seek cheaper places to live in their golden years and relocate to help keep costs down. Retirement should be a time to relax, enjoy life and embark on new adventures, but you won’t be having much fun in the sun if you’re constantly worried about money.
If you’re a retiree living on a fixed income, moving to a low-cost area can help you stretch your finances and reduce the headache of a limited budget. With an average annual income of $60,359 before taxes for those 65 and over and average yearly expenditures totaling $57,818, per Bureau of Labor Statistics, it’s crucial to make every dollar count in retirement.
Here are five affordable states for making your money go further in retirement, based on tax incentives for retirees and the lowest cost of living, which includes rent, utilities, food and transportation.
Alabama
Known for its southern hospitality and diverse landscape of mountains, valleys, beaches and riverbanks, Alabama has a wealth of natural beauty to be explored. And it’s very affordable.
According to data from Livingcost, the cost of living in Alabama is $1,861 monthly for one person — 1.18 times less expensive than the U.S. average. Plus, Alabama has some of the lowest property taxes in the country.
In addition, the historical state offers excellent tax incentives to retirees. According to Acts Retirement Life Communities, Social Security and retirement income from government pensions and 401(k) plans are exempt from taxes.
Iowa
Iowa isn’t a flashy state with sandy white beaches or huge attractions, but it’s a welcoming place with friendly people and it’s cheap to live. Livingcost indicates the average cost of living is $1,635 per person, per month, and there are plenty of benefits for retirees. “Social Security benefits are exempt from the Iowa state income tax,” according to SmartAsset. “Meanwhile, Iowans age 55 and older are also exempt from paying state taxes on retirement income, including distributions from a 401(k), IRA, pension, annuity and other assets.”
Mississippi
Mississippi is known for its deep-rooted traditions, quaint towns and beautiful scenery, but there are significant financial advantages to living in the state, especially as a retiree. For one person, the cost of living is $1,954 per month, according to Livingcost, and the state also has great tax benefits. Per SmartAsset, “Mississippi exempts all forms of retirement income from taxation, including Social Security benefits, income from an IRA, income from a 401(k) and any pension income.” Property taxes are low and the median annual property tax in the state is $1,052 — the sixth-lowest in the country according to SmartAsset.
West Virginia
With its breathtaking Appalachian landscapes and stunning rolling hills, West Virginia isn’t just a place of beauty; it’s currently one of the cheapest states to live in. The cost of living is $1,566 per person, per month, or 1.4 times less expensive than the average in the U.S., per Livingcost. The state offers low property taxes and only a 6% sales tax. Social Security isn’t taxed, but some retirement income is. “Other types of retirement income are also taxable but can be deducted up to $8,000 per person,” says SmartAsset. “If you have significant retirement income from, say, an IRA, your taxes in West Virginia may be quite high. On the other hand, if you rely mostly on Social Security income with only supplemental income from a pension or retirement account, your tax bill will be fairly low.”
Wyoming
Outdoor enthusiasts love Wyoming for its stunning ski resorts, vast open space and Yellowstone National Park. Retirees love the state for its affordability. Based on data from Livingcost, one person’s living cost is $1,764 per month and it’s a very tax-friendly state for retirement. Wyoming doesn’t have an income tax, so the state doesn’t tax retirement income, including Social Security benefits. In addition, sales tax is just 5.36%, and “Wyoming’s average effective property tax rate is 0.6%, which is the 10th-lowest rate in the U.S., according to SmartAsset. “That means homeowners pay about $600 in property taxes annually for every $100,000 in home value.”
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