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You’re going to have to be smart about retirement income in the years ahead—smarter than maybe your parents had to be. We are in uncharted territory for the retiring Baby Boomer generation with 401(k)s doing the heavy lifting once done by pensions. One way to keep more of what’s yours is to reduce taxes. Moving to another state isn’t always an option, but for some it could be a smart financial move.
Moving to another state doesn’t mean you’re leaving your family. Don’t worry they’ll visit! It’s a part-time gig (six months and a day). One way to see if it’s right for you is to rent for a year or two. You’ll be able get some on the ground intelligence and with the limited space you’ll have an easy excuse to keep the visits from all those cousins at bay.
I like this slide show from Fidelity Investments.
Here’s slide one, where you can see just how bad Rhode Island’s tax burden is on retirees.
10. Rhode Island
- State income tax: 3.75% (on income of up to $60,850) – 5.99% (on income of more than $138,300)
- Effective income tax rate: 3.8%/individual, 4.3%/joint
- State sales tax:7%
- Gas taxes and fees:34 cents per gallon
The Ocean State’s 7% state sales tax rate is the second-highest in the U.S., but the state has no local sales taxes to add to it. Groceries, most clothing and footwear, and prescription drugs are exempt. Over-the-counter drugs, such as aspirin, are taxed unless you have a prescription. The tax also applies to the portion of any individual sale of clothing and footwear that exceeds $250. The sales tax on vehicles is 7%.
Rhode Island is expensive for homeowners. The property tax on the state’s median home value of $236,000 is $3,855, the 11th-highest in the U.S.