Posted by: Richie Bernardo

Retirement might be the end of the line, but it doesn’t have to be the end of financial security or life satisfaction. Timing is often a primary concern with retirement, as it generally coincides with the age at which we become eligible to draw Social Security or pension benefits. Hopefully the choice will be ours and not dictated by our circumstances — the unfortunate case for nearly a third of nonretirees who haven’t put away a single penny for retirement, though not necessarily through any fault of their own.

But in addition to when you want to retire, a good question to ask is where, which can be difficult to answer if you haven’t adequately planned for your golden years. Even in the most affordable areas of the U.S., most retirees cannot rely on Social Security or pension checks alone to cover all of their living expenses. Social Security benefits increase progressively with local inflation, but they replace only about 40 percent of the amount you earned if you were an average worker, according to the Center on Budget and Policy Priorities.

If retirement is still a big question mark for you because of finances, consider relocating to a state that lets you keep more money in your pocket without requiring a drastic lifestyle change. To help you find that permanent, affordable place to call home, WalletHub’s analysts compared the 50 states and the District of Columbia across 31 key indicators of retirement-friendliness. Our analysis examines affordability, health-related factors and overall quality of life. Read on for our findings, expert commentary and a full description of our methodology.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/18592/state-retirement.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2j4L5C1;  

Overall Rank	State	Total Score	‘Affordability’ Rank	‘Quality of Life’ Rank	‘Health Care’ Rank
1	Florida	69.22	1	11	24
2	Wyoming	67.81	4	25	19
3	South Dakota	67.06	15	33	2
4	Iowa	66.26	26	6	5
5	Colorado	64.85	27	17	7
6	Idaho	64.12	14	31	16
7	South Carolina	64.00	7	37	33
8	Nevada	63.64	6	9	42
9	Delaware	63.59	10	40	25
10	Wisconsin	63.34	33	5	4
11	Pennsylvania	63.23	20	4	32
12	Montana	63.08	23	24	13
13	Arizona	63.04	21	16	21
14	Missouri	61.73	22	18	28
15	Michigan	61.69	28	12	26
16	Washington	61.31	31	20	17
17	Utah	61.25	25	35	18
18	Texas	61.11	3	36	44
19	Virginia	61.08	19	23	31
20	Georgia	60.55	11	32	41
21	Minnesota	60.49	45	2	1
22	Maine	60.41	37	7	14
23	North Carolina	60.27	18	26	37
24	New Hampshire	60.24	35	19	11
25	Ohio	59.59	24	22	36
26	Oregon	59.47	30	30	22
27	Kansas	58.83	34	14	23
28	Oklahoma	58.47	12	39	43
29	Tennessee	58.26	5	38	47
30	Nebraska	57.78	40	28	8
31	Illinois	57.15	32	15	38
32	California	56.90	42	8	20
33	Louisiana	56.74	9	43	46
34	Indiana	56.67	29	29	40
35	Massachusetts	56.58	47	3	10
36	Alabama	56.46	2	47	50
37	Maryland	55.73	39	21	27
38	North Dakota	55.09	43	42	6
39	West Virginia	54.48	13	44	48
40	Mississippi	54.48	8	49	51
41	New York	53.54	46	1	30
42	Arkansas	53.45	17	48	45
43	Kentucky	53.27	16	45	49
44	Vermont	52.79	48	10	12
45	New Mexico	52.61	36	41	39
46	New Jersey	52.55	41	27	35
47	Hawaii	51.85	50	34	3
48	Connecticut	51.34	49	13	15
49	District of Columbia	50.96	44	51	9
50	Alaska	50.82	38	50	34
51	Rhode Island	43.84	51	46	29

 

Ask the Experts

Choosing a place to settle for retirement requires careful consideration of various factors such as your finances, health and how you plan to spend your time. For advice on such matters, we turned to a panel of experts in fields such as aging and taxes. Click on the experts’ profiles to read their bios and responses to the following key questions:

1. What is the most common mistake that retirees make when choosing where to settle?
2. What are some tips for living on a fixed income in retirement?
3. What are the top factors retirees should consider in choosing which state to retire in?
4. Should states work to attract retirees? What are the pros and cons to having a large retiree population?
5. Should retirees be exempt from certain state and local taxes?

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• Steven Applewhite Professor Emeritus in the Graduate College of Social Work at University of Houston
• Scott R. Baker Assistant Professor of Finance in the Kellogg School of Management at Northwestern University
• Olivia S. Mitchell International Foundation of Employee Benefit Plans Professor, and Director of the Boettner Center for Pensions and Retirement Research in the Wharton School at University of Pennsylvania
• Mike Piper CPA and Author of The Oblivious Investor
• Teresa Ghilarducci Bernard L. and Irene Schwartz Professor of Economics, and Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research
• Joel Savishinsky Emeritus Professor in the Department of Anthropology at Ithaca College
• John Beshears Assistant Professor of Business Administration at Harvard Business School
• Phyllis Moen Professor of Sociology in the College of Liberal Arts at University of Minnesota, and Author of the upcoming book “Encore Adulthood: Boomers on the Edge of Risk, Renewal and Purpose”

Steven Applewhite Professor Emeritus in the Graduate College of Social Work at University of Houston What is the most common mistake that retirees make when choosing where to settle? The most common mistake retirees make when choosing where to settle is not weighing all the critical factors that can influence a decision to relocate. Among these critical factors are family proximity, geography and climate, availability and access to health services, local and regional culture, crime statistics, recreation and leisure opportunities, tax burden, and even political climate and employment prospects. However, it is important to note that many retirees today may choose not to settle elsewhere upon retirement but rather to "age in place" meaning they will remain in their homes as they enter their later years. For many, this is largely due to economic necessity, familiarity and comfort with their community and social environment. Many others, however, may be more inclined to resettle in "age-friendly communities” defined as livable communities where individuals of all ages can experience positive, productive lives, affording them greater objective and subjective well-being often termed happiness, mood, morale, and life satisfaction. Thus, a fundamental issue retirees will face is one of decision-making: to age in place or settle elsewhere. In either case, retirees choosing where to settle should base their decision on the most current and reliable information available on the “best place” to live. In doing so, retirees must further consider the most feasible, prudent and best course of action based on their health, finances and life circumstances. What are some tips for living on a fixed income in retirement? Living on a fixed income demands a realistic view of present and foreseeable changes such as health status, changing roles, income differentials, and life circumstances. First, retirees should consider doing an inventory of personal finances to compare financial assets versus expenditures in order to establish a debt-to-income ratio (DTI): the lower the DTI, the better the balance between debt and income. Simply stated, retirees should know how much they owe, to determine whether their debt exceeds current and anticipated income. This information is needed to help them live within their means and avoid premature or unnecessary expenditures and financial setbacks. Second, the proverbial three-legged stool - savings, pensions and social security - must be considered in financial planning. While not every retiree will have these combined assets, it nevertheless provides a general barometer for determining long-term financial security. Third, for many retirees who are part of the Boomer generation and fortunate to have a Defined Benefits Plan, commonly referred to as a pension plan, it is important to know what their plan will provide over their lifetime. With life expectancy increasing to an average of 84 years of age, retirees should know the type and amount of guaranteed income from all sources and the best approach to managing their income to ensure, as best as possible, that they are financially solvent in old age. Should states work to attract retirees? What are the pros and cons to having a large retiree population? States have long been attracting retirees to the so-called Sunshine states such as Arizona, Texas, and Florida, while the Midwest and East Coast states, often termed the Snow Belt and Rust Belt have experienced problems in retaining or attracting retirees. As a result, many states experience both permanent and seasonal out-migration of elderly residents. Among the many reason for both types of migration are warmer climate, economic opportunities, recreation and leisure, and tax friendly states. Two views should be examined closely for relevance and accuracy. One view suggests that states can only benefit from attracting retirees from an economic and social standpoint. Specifically, retirees are considered a source of economic growth and stability for a state’s economy through state and local taxes, investments, disposable income and the like. Beyond their economic contribution, retirees represent a strong social and political voice exerting a major influence on state and local politics though their political engagement and above average voting patterns. Retirees today are an informed and active voting bloc. From a work force perspective, prospective retirees are considered leaders and skilled decision- makers across all industries and levels. In today’s economy and political climate, older adults are a valued resource with unparalleled experience that can be infused into a state’s voluntary workforce. However, many prospective retirees are delaying their retirement date beyond 65 to maximize their retirement benefits and remain active, engaged and productive citizens until such time as they enter full retirement, bringing with them a wealth of knowledge, skills and a lifetime of work experiences to any given community. Finally, retirees are as diverse as our general population, and represent a source of diversity and intergenerational linkage through such roles as mentors, exemplary citizenry, role models and family matriarchs and patriarchs. National pride is built on diverse cultures and traditions sustained by the presence of older residents. Today’s retirees are considered the most diverse, highly educated, health conscious, politically astute, and financially secure age cohort than any previous generation in our nation’s history and can only strengthen a state’s population. An alternate view may not consider older adults as a resource nor necessarily a population to seek by a state, unless perhaps they are wealthy and self-sustaining. Currently and for the next 18 years, older Americans will retire at a rate of 10,000 workers a day. Like a double edged sword, many retirees who are financially secure and healthy today may enter old-old age as frail elders with chronic health problems and financial challenges, only to be assumed by state government services. With life expectancy increasing for men and women into early and mid-80’s, many will grow old with depleted resources, mounting health care costs, limited social services, and a porous social support network in a period when they most need assistance. Over the remaining course of their lives, retirees may turn to federal, state and local assistance programs and benefits to see them through these difficult years. Under this scenario, states will be faced with meeting the growing demands for health, mental health and social service needs for a substantial proportion of the state’s population. Elderly retirees, once considered the greatest human resource and economic boom for a state, may then be viewed as a potential economic burden. Faced with the unprecedented population growth of retirees nationally, states may not be eager to attract more retirees since their economic boost can change dramatically, and simply delay a new set of complex issues and potential realignment of social and economic priorities. Should retirees be exempt from certain state and local taxes? After a lifetime of contributions, many elderly have reached retirement age with accumulated wealth and the highest level of savings, investments and disposable income than any other population age group. As a result, retirees can be expected to make substantial contributions to the state coffers through such measures as state and local taxes. Thus, their positive impact is unquestionable, assuming retirees are in the middle to upper income categories. In the absence of significant financial incentives to attract retirees, states might experience only modest economic boosts, resulting in “belt-tightening” and potential reduction in state programs and benefits. State appropriations for critical programs and services could experience severe budget cuts or even elimination. To avert this potential problem, states can attract retirees by exempting elders from certain state and local taxes, through such measures as favorable state tax policies, elimination of estate and inheritance taxes, tax exemption of all retirement income, homestead exemptions, and other state and local exemptions. However, the assumption that states can only benefit from tax exemptions that benefit retirees and fuel the state’s economic engine is inconclusive and remains a question yet to be fully answered. Scott R. Baker Assistant Professor of Finance in the Kellogg School of Management at Northwestern University What is the most common mistake that retirees make when choosing where to settle? One of the worst mistakes is probably looking primarily at the tax burden in different states when differences in lifestyle and living expenses could easily swamp the financial benefits of a zero percent state income tax rate. What are some tips for living on a fixed income in retirement? Develop a comprehensive budget, including allowances for irregular expenses and growing healthcare costs. Familiarize yourself with all of your sources of income and benefits from previous jobs as well as the local, state, and federal governments. Should states work to attract retirees? What are the pros and cons to having a large retiree population? Retirees can often be a net-benefit economically to a state, bringing additional income and assets into an area and often not using as many services as younger families. However, a large population of retirees may stress state finances through additional health spending on Medicaid. Moreover, retirees may not bring as many positive spillovers in terms of innovation or entrepreneurship that may occur from states working to attract firms or younger workers. Should retirees be exempt from certain state and local taxes? No, age-based tax exemptions would just further distort the already complex tax system and place additional burdens on working families, many of whom are less well-off than current or future retirees. If Americans want to support low-income retirees through the tax system, they should explicitly target their exemptions based on income, not age. Olivia S. Mitchell International Foundation of Employee Benefit Plans Professor, and Director of the Boettner Center for Pensions and Retirement Research in the Wharton School at University of Pennsylvania What is the most common mistake that retirees make when choosing where to settle? From experience, I have found that many people fail to take into account their new state’s income tax rate and tax base. For instance, will pensions & Social Security be subject to tax or not? How much will be taxed? Answers to these questions can come as a rude shock if people move, having overlooked this item. What are some tips for living on a fixed income in retirement? Actually retirees are less likely to be living on “fixed income” than anyone else – insofar as Social Security benefits are indexed (for the most part) and salaries are not! But the main point is to budget carefully, including for health out of pocket costs, taxes, and health/long-term care insurance. (and then keep working if your predicted costs exceed your expected benefits!) Should states work to attract retirees? What are the pros and cons to having a large retiree population? Some states (and PA is one) want to attract and retain retirees, on the argument that this group represents a relatively stable purchasing power base that is less susceptible to the macro economy than others. On the other hand, if they live a long time and need to apply for SSI, DI, Medicaid, and other benefits, the states may end up bearing some of the cost. Mike Piper CPA and Author of The Oblivious Investor What are some tips for living on a fixed income in retirement? Aside from the obvious frugality-related suggestions, my suggestions would be to pay careful attention to tax planning and Social Security planning. For instance, for many people, by delaying Social Security and living off of tax-deferred accounts in the meantime (and possibly even doing Roth conversions during those pre-Social-Security years), it's possible to arrange things such that very little (or even none) of their Social Security benefits are taxable. In addition, it's important to put some thought into determining which Social Security claiming strategy is likely to result in the most benefits received over your lifetime. For instance, for married couples, it's almost always advantageous for the spouse with the higher earnings record to wait to claim Social Security, because doing so increases the amount that the couple receives per month as long as either spouse is still alive. Teresa Ghilarducci Bernard L. and Irene Schwartz Professor of Economics, and Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research What is the most common mistake that retirees make when choosing where to settle? The most common mistake that retirees seem to make when choosing where to settle is picking places where the weather is good or where their children are. Children move and good weather alone does not make people feel happy or contented. If places with good weather are places where people create an active social or political life and good weather is a short hand way to say that a retiree chose a place where the retire is dedicated to activities that improve an old person's life which is -- calorie restriction, physical exercise, cognitive stimulation and social support -- then seeking a place that offers all those opportunities is a good decision. Often staying where you are or moving to an urban area provides what people need for successful aging. What are some tips for living on a fixed income in retirement? Planning. In the current month your budget plans may not be useful but planning is essential. You can plan unexpected expenses and never feel that middle of the night anxiety about paying the bills no matter what your budget is. Should states work to attract retirees? What are the pros and cons to having a large retiree population? States should attract retirees! They bring in experience and spending power. The demand for services can lead to innovation in geriatric services, nursing home quality, and growth in health related professions. Joel Savishinsky Emeritus Professor in the Department of Anthropology at Ithaca College My research with retirees and their families affirm that most people are interested in questions that go beyond, or pre-empt, 'where' to retire. They want to have meaningful lives that connect them to community, family, and a sense of purpose... not just a climate or tax 'haven.' That is why so many retirees choose to 'age in place' -- in communities they know and are connected to. And, in the end, people discover, if they don't already know, that you don't 'move' to a community: you have to work to build or maintain one. Hiring a mover does not do that work for you. For those who do relocate, the impetus is to be closer to families, including grandchildren. Even for those who initially move to, say, a sunbelt state, as years go by and health status changes, they often 'move back' or move yet again to be closer to those who can help them...and who they can help in turn. My admittedly cynical surmise is that someday, some computer wonk will develop an algorithm that will tell people not just what state to retire to, but what block in what neighborhood in what city in what state they will be 'happiest' in. The retirees I've worked with are smart enough to know that 'ten best lists' of places to retire to are concocted by journalists needing a catchy piece to meet a deadline: they do not seriously take into account what retirees value and need, or how their lives are shaped by the aging process. John Beshears Assistant Professor of Business Administration at Harvard Business School What are some tips for living on a fixed income in retirement? It is well known that people living on a fixed income should make a budget, but it is less well known that there are two important mistakes that people make when they go through the trouble of forming budgets. First, it is very easy to think about and plan for regular expenses like utility bills, groceries, and gas for the car, but people have trouble appreciating the fact that there are a lot of one-time expenses that are an important part of their month-to-month spending, like a large doctor's bill or a bill for car repairs. Every time such a one-time expense occurs, it feels special and therefore unlikely to arise again. It's true that any particular expense of this nature is unlikely to arise again, but it's safe to bet that there will always be some one-time expense that appears in a given month. People need to plan for these expenses - one way to do this is to look back at previous months of spending to get a sense of how large these expenses are. Second, people have trouble appreciating the fact that their spending needs at the moment they retire are very different from their spending needs later in life. As people get further and further into retirement, they may spend less money because they travel less, but it's likely they will also start to incur larger and larger health care expenses. People need to make sure they ask themselves certain questions as they plan for handling these costs. Medicare provides a lot of benefits, but should they set aside extra money for out-of-pocket health care costs? Would long-term care insurance be a good purchase? Planning is crucial, and people need to pay attention to the right possible future events when they plan. Phyllis Moen Professor of Sociology in the College of Liberal Arts at University of Minnesota, and Author of the upcoming book “Encore Adulthood: Boomers on the Edge of Risk, Renewal and Purpose” What is the most common mistake that retirees make when choosing where to settle?

1. Moving just for weather or lifestyle, without thinking about social connections;
2. Buying too expensive condo or house, then having to worry about the payments.

What are some tips for living on a fixed income in retirement? Practice for six months or a year before you retire... Putting any money above the fixed income amount in savings... You may decide to postpone retirement for a bit or look for another part time job. One person I talked with decided he needed to consult 100 hours a year to have the income he and his wife needed. Others find they can live comfortably on less... And enjoy scaling back on expensive extras.

Methodology

In order to identify the most retirement-friendly states, WalletHub’s analysts compared the 50 states and the District of Columbia across three key dimensions: 1) Affordability, 2) Quality of Life and 3) Health Care.

We evaluated those dimensions using 31 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for retirement.

We then calculated the overall score for each state and the District using its weighted average across all metrics and constructed our final ranking based on the resulting scores.

Affordability – Total Points: 40

• Adjusted Cost of Living: Double Weight (~16.00 Points)
• General Tax-Friendliness: Full Weight (~8.00 Points)Note: This metric is based on WalletHub’s States with the Highest & Lowest Tax Rates ranking.
• Tax-Friendliness on Pensions & Social Security Income: Full Weight (~8.00 Points)
• Annual Cost of In-Home Services: Half Weight (~4.00 Points)
• Annual Cost of Adult Day Health Care: Half Weight (~4.00 Points)

Quality of Life – Total Points: 30

• Share of Population Aged 65 & Older: Full Weight (~2.14 Points)
• Elderly-Friendly Labor Market: Full Weight (~2.14 Points)Note: This metric takes into account both the percentage of people aged 65 and older working and the number of part time employees for every full time employee for people aged 65 and older.
• Share of Population Aged 65 & Older Below Poverty Level: Full Weight (~2.14 Points)
• Access to Public Transportation: Full Weight (~2.14 Points)Note: This metric measures the percentage of commuters who use public transit as a proxy for the availability of public transportation.
• Mildness of Weather: Double Weight (~4.29 Points)Note: This metric is based on WalletHub’s Cities with the Best & Worst Weather ranking.
• Museums per Capita: Full Weight (~2.14 Points)Note: This metric was measured by the square root of the population.
• Theaters per Capita: Full Weight (~2.14 Points)Note: This metric was measured by the square root of the population.
• Golf Courses Capita: Full Weight (~2.14 Points)Note: This metric was measured by the square root of the population.
• Access to Adult Volunteer Activities: Full Weight (~2.14 Points)
• Violent-Crime Rate: Full Weight (~2.14 Points)
• Property-Crime Rate: Full Weight (~2.14 Points)
• Quality of Elder-Abuse Protections: Full Weight: Full WeightNote: This metric is based on WalletHub’s States with the Best Elder-Abuse Protections ranking.
• Air Quality: Half Weight (~1.07 Points)
• Drinking-Water Quality: Half Weight (~1.07 Points)Note: This metric measures the percentage of the population potentially exposed to water exceeding a violation limit.

Health Care – Total Points: 30

• Family & General Physicians per Capita: Full Weight (~2.61 Points)
• Dentists per Capita: Full Weight (~2.61 Points)
• Nurses per Capita: Full Weight (~2.61 Points)
• Health-Care Facilities per Capita: Full Weight (~2.61 Points)
• Quality of Public Hospitals: Full Weight (~2.61 Points)Note: This metric is based on Centers for Medicare & Medicaid Services’ ranking of public hospitals.
• Emotional Health: Half Weight (~1.30 Points)
• Share of Population Aged 65 & Older with Health Insurance: Full Weight (~2.61 Points)
• Share of Population Aged 65 & Older with Good or Better Health: Full Weight( ~2.61 Points)
• Share of Population Aged 65 & Older with a Disability: Full Weight (~2.61 Points)
• Share of Population Aged 65 & Older Who Are Physically Active: Full Weight (~2.61 Points)
• Life Expectancy: Full Weight (~2.61 Points)
• Death Rate for Population Aged 65 & Older: Full Weight (~2.61 Points)

 

Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Federal Bureau of Investigation, Council for Community and Economic Research, U.S. Bureau of Labor Statistics, Retirement Living Information Center, Genworth Financial, United Health Foundation, County Health Rankings, Measure of America, Centers for Disease Control and Prevention, Centers for Medicare & Medicaid Services, Charity Navigator, Gallup Healthways, GolfLink and WalletHub research.

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