Are you thinking about moving to a different state when you retire? Many do. It’s a big move, and many only think about the climate or proximity to loved ones. You should also consider how moving could dramatically impact your investment strategy.
No, investments don’t perform differently depending on where you live, but a move has the potential for tax advantages, trust-friendly laws, or a lower cost of living that are all critical factors for a happy retirement.
Some states avoid state income taxes and some offer unique trust advantages that can help retirees protect their assets, reduce tax obligations, and pass wealth to future generations more efficiently. Let’s take a look at seven states (by alphabetical order) that offer some benefits you may want to consider:
Alaska
Why It’s Great for Trusts, Taxes, and Living:
- No state income tax and no estate or inheritance taxes, making it a tax-efficient choice for retirees.
- Alaska allows perpetual trusts and provides strong asset protection, including self-settled trusts.
- Additionally, the state offers flexible trust laws, allowing changes to irrevocable trusts under certain conditions.
- Alaska’s cost of living is higher than the national average, with significant expenses in groceries and other essentials due to logistics.
Arizona
Why It’s Great for Trusts, Taxes, and Living:
- Low state income tax: Arizona has a flat 2.5% state income tax - one of the lowest in the country.
- No estate or inheritance taxes, making it easier to transfer wealth across generations.
- Trust-friendly laws: Arizona is considered to have some of the best trust laws in the Country.
- Arizona’s cost of living is approximately 6% above the national average, although it can vary depending on city.
Delaware
Why It’s Great for Trusts, Taxes, and Living:
- No sales tax and no taxes on trust income for non-residents, making it ideal for setting up out-of-state trusts. Commonly called a Delaware Statutory Trust - this trust has been a strategy for non-residents since 1988.
- No estate or inheritance taxes, which helps retirees minimize wealth transfer costs.
- Delaware also allows perpetual trusts and offers flexibility through directed trusts, where investment and administrative duties can be separated.
- Delaware’s cost of living is close to the national average, with housing costs slightly below average.
Florida
Why It’s Great for Trusts, Taxes, and Living:
- No state income tax: Retirement income and trust income are not taxed at the state level.
- No estate or inheritance taxes, making it easier to transfer wealth across generations.
- Trust-friendly laws: Although it does not offer as much protection as other states, Florida does have a favorable tax environment for trust and continues to update it’s trust laws. Trusts are allowed to exist to perpetuity.
- Florida’s cost of living is approximately 2% above the national average, although it can vary depending on city.
Nevada
Why It’s Great for Trusts, Taxes, and Living:
- No state income tax, meaning trust income and retirement income are untaxed at the state level.
- No estate or inheritance taxes, ensuring lower costs for passing wealth to heirs.
- Asset protection: Nevada’s trust laws are among the best for protecting assets. The state allows for self-settled spendthrift trusts, meaning you can be a beneficiary while still protecting the assets from creditors.
- Nevada’s cost of living is on par with the national average, though housing and transportation costs are higher.
South Dakota
Why It’s Great for Trusts, Taxes, and Living:
- No state income tax: Retirement income and trust income are not taxed at the state level. The average U.S. State income tax is 8.9%, so paying zero is a huge savings.
- No estate or inheritance taxes, making it easier to transfer wealth across generations.
- Trust-friendly laws: South Dakota allows perpetual trusts (which can last forever) and offers strong asset protection from creditors.
- South Dakota’s cost of living is approximately 7.7% below the national average, with particularly low utility costs.
Wyoming
Why It’s Great for Trusts, Taxes, and Living:
- No state income tax on retirement or trust income.
- No estate or inheritance taxes, making it easier to pass wealth on to heirs without state-level tax burdens.
- Wyoming permits a trust to last up to 1,000 years, allowing for long-term asset protection. It also has strong asset protection laws and allows the creation of quiet trusts, which can withhold information from beneficiaries for a specified time, offering more privacy and long-term control over the assets.
- Wyoming’s cost of living is about 4.6% below the national average, with housing costs being particularly affordable.
Often when you think you're at the end of something, you're at the beginning of something else." —Fred Rogers
So yes, moving to another state for retirement is a big move, but it could be worth considering. If you’re near the edge of retiring and have a robust portfolio, you may want to explore opportunities in other states for more than just the golf courses, beaches, and balmy weather. It may just be the right ingredient in your retirement recipe needed to stretch those dollars and still have some to pass along to the next generation.
Consider a conversation with a knowledgeable Wealth Management Team to see if making a move like this would work well for your situation. Remember, the right strategy, and working with the right team, can make a big difference in preserving your wealth and ensuring a secure, comfortable retirement!
For a full list of states and their retirement pros and cons, check out this piece from Kiplinger.
Cost of Living stats source: https://meric.mo.gov/data/cost-living-data-series
