Though everyone's "finish line" is unique and ever-changing, the average American's ultimate goal is generally retirement and financial independence. We work hard for decades, save diligently, and invest in order to retire comfortably while also potentially setting up our loved ones for success long after we're gone.
But deciding where to retire can sometimes be just as tedious as picking out the next great stock or mutual fund. There are thousands upon thousands of cities within the United States to choose from, with each locale offering different sales tax and property tax rates, as well as different lifestyles. Choosing where to retire can seem almost like a chore.
Thankfully for those of you nearing retirement, the AARP released its list of the 10 best cities to retire in late last year, with its primary focus on how it could save retirees money over the long term. And who better to rank our nation's finest retirement destinations than an organization dedicated to retired persons?
Today, we'll take a quick glimpse at each of the 10 best cities to retire in and examine what it is about these cities that could make them particularly attractive to retired persons.
Daytona/Deltona/Ormond Beach, Fla.
It shouldn't surprise anyone that Florida locations made this list, as Interest.com notes that the Sunshine State has the highest percentage of retirees in the nation, at 27.9% of its population. With the exception of the occasional hurricane, Florida's weather is also pleasant and consistently warm. Additionally, Florida's state and local tax burden of 9.3%, according to The Tax Foundation, falls below the national average of 9.9%. Florida residents will also enjoy not paying any taxes on their Social Security benefits or pensions.
With regard to Daytona, Deltona, and Ormond Beach, residents enjoy a median home price under $109,000, which is fantastic, considering that the median home value in the U.S., according to Zillow, is $175,600!
Idaho may not have warm weather year-round, but it offers some of the most beautiful scenery in the country. On top of being beautiful, the state is also quite friendly to retirees' pocketbooks, as there's no state tax on Social Security benefits, and the state's rivers provide cheap hydroelectric power, making for relatively inexpensive electricity bills. Seniors may also be eligible for sizable property tax breaks within the state if they meet certain criteria, which can lower their property taxes by as much as $1,320 for an acre of land. Finally, Idaho's combined tax burden is also the lowest it's been on record, at 9.4%.
With regard to Pocatello, retirees will enjoy a median home price of less than $128,000 and a median property tax of just $1,179. For context, median property taxes nationwide are a hair over $1,900!
As someone who vacationed in Maine recently, I again have to fall back on the beauty of the state as a primary attraction for seniors. Whether you want a national park or city living, it's all within driving distance. Residents of Maine do have the ninth-highest tax burden in the country, but the state makes up for this with no tax on Social Security benefits, no inheritance tax, and a handful of property tax exemptions that seniors aged 65 and up may qualify for.
As AARP notes, Bangor offers a median home price of just $110,400 and a median property tax that, at $1,303, is well below the national average.
South Carolina residents may not catch quite as much sun as their Florida counterparts, but there are plenty of reasons to consider South Carolina a retirement-friendly state. For example, retirees pay no taxes on their Social Security benefits, there's no estate tax or inheritance tax, and the state offers a property tax break for seniors known as the homestead exemption, which allows the first $50,000 of a property's fair value to be exempt from taxation. In order to qualify, a senior citizen simply must be aged 65 or older and must have lived in the state for at least one year.
Greenville is particularly intriguing because its median property tax of $753 is far below the national average.
Grand Rapids, Mich.
As AARP put it, if you're looking for a tightly knit community of people, Grand Rapids could be the city for you.
Michigan as a state does not tax Social Security benefits, has no estate or inheritance taxes, and has a combined tax burden that's just a hair below the national average at 9.8%. If there is one knock against the state it's that it has a higher property tax burden compared to some of the other cities on this list, but even so, a homestead exemption exists here as well for property owners whose residence is valued at less than $50,000.
South Bend, Ind.
If you have aspirations of reliving your college days, then South Bend, Ind., home of the University of Notre Dame, could be calling your name. On top of the entertainment factor of being located in a college town, South Bend residents' median home values are well below the national average at $82,500. This means small mortgage payments and low property taxes.
The state of Indiana as a whole doesn't tax Social Security and has a combined tax burden of 9.6% (slightly below the national average), and homeowners aged 65 and older who make less than $25,000 per year are eligible for a property tax reduction so long as their property value is $182,430 or less, according to Kiplinger.
Pennsylvania's combined state and property taxes might be a bit higher than the national average, but it makes up for that in a number of other key categories. For instance, state residents pay no taxes on their Social Security benefits or their pensions. Additionally, Pennsylvania no longer has an estate tax as of 2012, and lower-income senior citizens aged 65 and up, or widows/widowers aged 50 and up, can receive property tax or rent rebates of $650 (though supplemental rebates can actually boost this figure to $975).
The real draw of Erie is twofold. First, the city' relatively cheap median home price of less than $107,000 makes it an attractive retirement destination. Also, its location on one of the Great Lakes gives Erie a perfect balance between big-city feel and outdoor getaway.
If you're looking for a dose of Southern charm and a big helping of arts and culture, then AARP suggests Louisville, Ky., might be the best city for you to retire in. It also doesn't hurt that the median home value of $128,200 in Louisville is nicely below the national average.
The state of Kentucky is retiree-friendly from a number of aspects, including the fact that its combined tax burden is modestly below the national average, it doesn't tax Social Security benefits, and it allows retirement-income exclusions (e.g., pensions, IRAs, annuities, and 401(k)s) of up to $41,110. Kentucky is also estate-tax free, and immediate beneficiaries such as a spouse, parent, child, brother, sister, or grandchild are exempt from the state's inheritance tax.
If you hate taxes, then chances are you'll love Texas! Texas ranked as the sixth-lowest state on the Tax Foundation's combined tax burden list. It has no state income tax (it's one of only seven U.S. states that don't have a state income tax); it doesn't tax Social Security; it has no estate or inheritance tax; and it doesn't tax other retirement income, either! Not to mention that Texas' weather is temperate compared to most of the U.S.
As AARP points out, the cities of Sherman and Denison offer some of the lowest-cost housing in the country with a median home price of just $79,400 (working out to a $303 monthly mortgage payment), which leads to reasonably low property taxes.
Lastly, as AARP notes, Pueblo offers a relatively temperate climate, and Colorado residents have a history of being among the healthiest people in the country, with a lower rate of heart disease and cancer compared to the national average. Not to mention that Pueblo's median home price and property tax are both well below the national average.
Colorado as a state does have one knock against it: It taxes Social Security income, though it provides exemptions up to $20,000 for those beneficiaries under age 65 and up to $24,000 for those aged 65 and up. Colorado also offers a generous homestead exemption on property taxes for seniors, allowing those aged 65 and up to exempt 50% of the first $200,000 of the value of a residence. It also has no estate tax or inheritance tax.