Pulling the ripcord: Climate, kids or taxes?

If and when you decide to retire, lots of things will come into play. As in what next? Maybe for 20 or 30 years.

A key retirement decision is will you have enough money — once the biweekly paycheck you’ve grown to love and depend on — becomes a much smaller monthly annuity benefit? And there are other issues:

• Do you want (need) to downsize? Or shelter-in-place?

• Do you want to stay where you are because of family, friends. Or get away from them? Or move somewhere with less traffic and better weather?

For lots of people anticipating less income, the issue of taxes is a move-or-stay deal-breaker.

Twenty years ago, a friend who worked for the GSA retired. He worked in D.C. and lived in Virginia and was born in the Midwest. He was not the outdoors type. Neither a hunter, fisher, hiker or climber. He moved to a small town in Washington state. It is across the Columbia River from Portland, Oregon Why there? I asked. Simple, he said, Washington has no state tax. Oregon (where he planned to do all his shopping, had no sales tax! The tax situation was important enough, to him and his spouse, that they moved 2,000 miles away to otherwise unknown territory. As far as I know, he loved it. Because not paying taxes was very important to him.

But is that your thing? Is not paying taxes, or paying less, important enough to move from where you are?

Why would a fed who spent all his or her life working in Fort Knox, Kentucky, retire to Tennessee? Graceland is nice, but… why would a civil servant with roots in Virginia move to Wyoming? Or a retiring Marylander move to Wyoming? The answer could be taxes.

Lots of people think that taxes (or lack of them) are very important once they retire. That’s one reason the April issue of NARFE magazine (National Active and Retired Federal Employees) focuses on taxes of interest to retirees or people planning for retirement.

Did you know there are some states that don’t tax federal annuity payments. Others have no state tax. Some with no sales tax. Some don’t tax Social Security benefits.

There is no personal income tax in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming and special tax breaks in Tennessee that make it preferable to Kentucky, and for people in high-tax Massachusetts to live or work in New Hampshire.

There also some states that don’t tax some or all of your civil service annuity. They include Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Mississippi, New York and Pennsylvania.

Coming Up: The pros and cons of working, and/or retiring for tax reasons for feds and retirees in California, New York, Maryland, Virginia, Texas, Georgia and Florida.

Nearly Useless Factoid

By Michael O’Connell

One cubic mile of seawater contains about 120 million tons of sodium chloride.

Source: USGS

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