Fletcher: Residency factor in retirement locations
Quite a long time ago, I attended a seminar about making profits.
I thought the seminar would offer some tips on increasing sales, reducing expenses, improving productivity and similar subjects for corporate types. I was surprised when I discovered in the first few minutes of the presentation that I was dead wrong.
This guy was talking about taxes.
His thesis was since corporations pay taxes at more than a 40 percent rate, a good way to increase one’s net profit was to work the tax loopholes in the more than 4,000-page Tax Code. He explained one would have to double their sales volume or make a drastic change in production to achieve the same result.
I believe this mindset applies to retirement as well. The Kiplinger Retirement Letter has two lists: First, it offers a compilation of states that have no personal taxes and second, a list of tax-friendly states for retirees.
As the Alpena High School classes of 1964 and beyond get ready for retirement, each person, I can assure you, is concerned about outliving his/her retirement savings and Social Security. It causes some angst just to discuss such an eventuality. Thus, I looked up the states with low tax rates or those that were “tax friendly to retirees.”
There are seven states that have no personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Four of these – Florida, Wyoming, Nevada and Alaska – also are “tax friendly to retirees.” You’ll note that none are in the Northeast nor the Midwest. The other “friendly” states are Georgia, South Carolina, Louisiana, Mississippi, Arizona, and (what the heck!) Delaware.
In retirement maybe you’ll want mountains, beaches, warm weather or a combination of several key factors. Perhaps taxes should be included on your list.
When you are filling out your Michigan income tax return in the next few weeks, think about what you might do with that money in a state where you could keep it. This is the stuff dreams are made of.
When you think of retirement expenses, taxes should be a part of the equation. If you plan on spending time in a low-tax state, then one of your options might be to obtain residency there and spend your summers in Michigan.
If it’s a “tax free” state, it could offer you the best of both worlds.