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Smart (Military) Retirement Choices

Here is another installment of the series on smart places for military people to consider for their retirement homes. In the first installment I discussed the importance of staying connected to military benefits by choosing a location within a 30 minute drive of a military installation. In this article I will talk about taxes and your military benefits.

As you know, tax policies vary state to state. In some states, for example, there is not state income tax. Funding for schools, roads, police and fire protection, the courts and the prison systems come instead from property and sales taxes. In other states, revenues are raised through a combination of income, property, energy, and sales taxes. The bottom line is that each state must find a way to pay for the services it provides, but some states are just more efficient than others.

According to Retirement, the states with the highest composite taxes are:

  1. New Jersey
  2. New York
  3. Connecticut
  4. Maryland
  5. Hawaii
  6. California
  7. Ohio
  8. Vermont
  9. Wisconsin
  10. Rhode Island

The states with the lowest taxes are:

  1. Alaska
  2. Nevada
  3. Wyoming
  4. Florida
  5. New Hampshire
  6. South Dakota
  7. Tennessee
  8. Texas
  9. Louisiana
  10. Arizona

I do need to point out that the difference between the highest tax rate (11.8% in NJ) and the lowest (6.4% in Alaska), while significant, is not so dramatic that it would outweigh personal decision factors such as proximity to family and friends, connections to the region, cultural, climate, and job opportunities. It is simply a way to narrow down your choices if you are open to a variety of options.

Many Californians, for example, have moved to Nevada both to save money on taxes and to be able to afford larger homes. Florida, over the past 50 years, has become the destination of choice for many retirees from the Northeast who wanted to escape the bitter winters and high taxes.

So, when narrowing down your retirement destinations list, contact the state tax department to make sure you understand how much your military retirement benefits will be taxed.

Many states do not tax military retirement benefits. Some of them are on the “Top 10” most expensive list above. They are Hawaii, New Jersey, and Wisconsin. You may find that after taking income taxes out of their equation that these states actually become more attractive for military retirees. ALOHA!


2 thoughts on “Smart (Military) Retirement Choices

  1. Thanks for this information. I am a reservist currently living in Maryland. I noticed that Virginia is not on either the most of least expensive states. Any idea where it falls on the list?

    Posted by Scott Walton | December 6, 2008, 4:14 pm
  2. Virginia was ranked #18 in the country in the table sourced by Retirement Living.

    Posted by Lee | December 14, 2008, 4:02 am

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