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Planning to Retire? Avoid Living in These States!

by Jason on January 24, 2011

If you’re getting ready to retire and thinking about where to live, you may want to think twice about which state you choose.

Last month, TopRetirements.com ran an article posted by John Brady detailing the worst states to live in for retirees.  Their weighting system included taking a look at fiscal health, taxation, and climate.

So why those three criteria?  Many states are experiencing their own financial crises, with some of them dangerously close to bankruptcy.  Taxation will play a major role in retirement since any additional tax will reduce purchasing power in retirement, and of course climate is a big factor because a lot of retirees from the North want to migrate to warm-weather climates.

So here are the top ten worst states to live in for retirees:

1. Illinois

This doesn’t surprise me at all.  I live in the surrounding Chicagoland area, and I get to hear the IL news regarding their financial instability and high tax rates all the time.  In fact, they just recently voted to increase state income tax by 66%!   At least Illinois does not tax pension or social security income.

2. California

Brady says, “The Golden State is expensive and its finances are in serious disarray.  Has paid bills with vouchers in the past.  Does have a warm climate, which helped keep it out of 1st place. And to illustrate that fiscal health and taxes are by no means the only things to rank a state on, California is the 5th most popular retirement state on this site (based on number of page views of our California retirement guide).”

3. New York

High taxes, cold climate, and dysfunctional legislature puts this state in the top three!

4. Rhode Island

Brady says Rhode Island probably ranks first in terms of financial instability.  Although they do have some great laces to live, they do have high taxes.

5. New Jersey

I didn’t know that NJ has the highest property taxes in the U.S. as well as the highest tax burden (as reported by the Tax Foundation).  Unfortunately, they’ve got some serious pension funding issues, and a horrible basketball team.

6. Ohio

If you want to live in a state with high taxes, high unemployment, and bitterly cold winters, then Ohio is your place!  Even LeBron couldn’t wait to get out of there!

7. Wisconsin

The good news for veterans is that Wisconsin does not tax military pensions.  The bad news for other residents…it’s Wisconsin.

8. Massachusetts

The cost of living is very high in MA, along with its property taxes.

9. Connecticut

Surprisingly, Connecticut has the 3rd highest tax burden of any state, and they tax social security.  Brady says, “It has some terrific places to live, but the cost of living is very high.”

10. Nevada

Poor Nevada, things were going so well for them until the real estate bubble burst.  Now it is the foreclosure capital of the world!  The state is having financial problems, but for now it does not have an income tax.  That might change soon.

Honorable Mentions:

Brady says, “Arizona, Oregon, and Florida are all frequently mentioned as problem states because of their unhealthy economies. These high-growth states are having to deal with no growth, and the transition has been difficult. On the plus side, they (except for OR) have warmer climates and are popular with retirees. Florida does do not have an income tax, Oregon does not have a sales tax or tax social security or military pensions.”

By the way, if you’re thinking about heading to a different country, you may want to check out the different tax rates by country before you make your decision!

Readers What Do You Think?

  • Does this list surprise you?
  • Where do you plan on retiring?

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