States That Exempt Social Security, 401(k), IRA, and Pension Income from Taxes

The Best States for Retirees: Where to Avoid Paying Taxes in Retirement

As you approach retirement, one of the biggest concerns you may have is how much of your hard-earned money will go towards taxes. While federal taxes are unavoidable, some states are much more tax-friendly towards retirees than others. In fact, there are several states that don’t tax retirement income at all, making them ideal destinations for those looking to stretch their retirement savings further.

Illinois, Iowa, Mississippi, Pennsylvania, New Hampshire, and South Carolina are just a few of the states that offer significant tax breaks on Social Security, pension income, 401(k) withdrawals, IRA distributions, and military retirement pay. For example, Illinois exempts pension income and Social Security benefits from state taxes, while Mississippi spares retirement plan distributions and military retirement pay from being taxed.

Moreover, states like New Hampshire and South Carolina have recently made changes to their tax laws to be more retirement-friendly. New Hampshire repealed its tax on interest and dividends, while South Carolina now exempts all military retirement pay from state income taxes.

If you’re looking to avoid state income taxes altogether, there are nine states that do not tax any retirement income, including Alaska, Florida, Nevada, Texas, and Wyoming. These states offer automatic tax relief for retirees, allowing them to keep more of their hard-earned retirement income.

While tax laws can change, it’s important to consider the tax implications of retiring in different states. By choosing a tax-friendly state for retirement, you can maximize your savings and enjoy a more financially secure future.

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