Build a sizable nest egg? Check. Purchase a new set of golf clubs? Check. Plan for taxes on your retirement income? Chhhh … Wait a minute. Plan for what?
Lots of retirees are surprised by the big bite that taxes can take out of their savings . And depending on where you live, the tax hit can be especially painful. In fact, some states even tax Social Security benefits , the most important source of income for many retirees.
The 13 states that tax Social Security are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.
But just because a state taxes Social Security doesn’t mean it’s a bad place to retire. Overall, Colorado and West Virginia are actually tax-friendly places to live in retirement despite the tax on Social Security. Weigh a state’s entire tax picture — from income tax to sales tax to property tax — to better understand how your money will be taxed and how you can budget for those costs.
Kiplinger’s tax maps can help. Check out the most tax-friendly states for retireesand the least tax-friendly states for retirees to identify your best place for retirement.