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by: Ken Morris
Financial planning is really life planning. Choosing a home,
particularly a retirement home, involves many factors. With
state and local taxes on the rise, retirees should look closely
at tax matters when formulating their retirement financial
plan.
Retirees who plan on continuing to work in their "golden
years" should know that state taxation of such income
varies widely. Some states give retirees favored treatment
on earned income, some treat retired seniors like everyone
else, and some impose no tax at all on earned income. Taxation
of investment income shows nearly as much variation between
states. Retirees in a new domicile must also watch out for
unexpected municipal income taxes.
Income from government, military, private pension and other
retirement plans is growing increasingly important to the
survival of retired individuals. Some states exempt all such
pension income from taxation, while others exempt certain
types or place limits on non-taxable pension income. Some
states even tax former residents on retirement plan withdrawals,
creating the possibility of paying income tax in two states.
Some states follow federal tax formulas for taxation of Social
Security benefits, others have their own formulas, and some
tax benefits not at all.
Sales and property taxes must also be considered. Again,
some states offer property tax advantages to retired seniors
while others provide homestead exemptions. Retirees should
consider sales taxes when estimating their retirement budget
for such items as clothing, household goods, food and drugs.
It is also important not to overlook the effect of estate
taxes upon the surviving spouse. Some states do not provide
an unlimited marital deduction. Property ownership laws must
also be examined in this area when considering the distribution
of possessions upon death. Changes in these laws must be monitored
as many states will attempt to make their financial environment
more appealing to retirees.
All retirees weigh the cost of living, weather, nearness
to relatives and recreational opportunities in their decision
to settle in their retirement community. The tax climate should
also be examined to analyze the financial situation during
retirement. Working with an experienced financial planner,
as well as a tax advisor, is often recommended to those looking
for a retirement home.
About The Author
Ken Morris, a fee based Investment Advisor Representative
with Raymond James Financial Services, Inc., helps 401k participants
get the most out of their corporate plans.
raymondjames.com
lindsay.brickner@raymondjames.com
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