Retirees in these 12 states risk losing some of their Social Security checks | Smart Change: Personal Finances

(Maurie Backman)

Social Security could become an essential source of income for you in retirement. This is true even if you start your last years with a healthy nest egg.

Seniors are often surprised that a nest egg of $300,000 or $400,000 starts to run out quite quickly once retirement begins. The advantage of Social Security is that you are guaranteed your monthly benefits for life, while there is always the possibility of running out of savings if you are too aggressive with withdrawals or market conditions don’t work out. not in your favor.

But many Social Security recipients are shocked to learn that the benefits may be taxable — and not just at the federal level. There are a number of states that impose their own taxes on Social Security income, and if you’re considering relocating to one of the states on this list, you’ll need to consider that.

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The 12 States That Tax Social Security

Previously, 13 states imposed their own Social Security taxes, but this list has thankfully been reduced to 12. The states that now tax Social Security income are:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. Rhode Island
  10. Utah
  11. Vermont
  12. West Virginia

Keep in mind that most of these states offer a tax exemption on Social Security benefits for low earners. Some even include people with moderate incomes in these provisions. But if you’re planning to retire in one of these states, read its benefit tax rules so you know what you’re getting into.

Should we exclude the 12 states that tax Social Security?

Seeing this list, your first instinct may be to decide that you simply won’t retire in one of these states so you can keep more of your Social Security income. But it’s not necessarily the best decision.

Some of the states above are very affordable, compared to other parts of the country. Even if you lose some of your Social Security income to state taxes, you could still get by financially.

Additionally, you may have personal reasons for wanting to move to one of these states. If you love nature, you might be inclined to spend your retirement in Colorado, where you’ll have ample access to hiking and outdoor sports. If you want to live in a remote location without spending a ton of money on housing, Montana might be a good choice.

Maybe you have family in Minnesota and don’t mind the cold winters. It’s important to have a support system close by during retirement, so paying taxes on your Social Security earnings can help to get it.

Look at the big picture

Taxes are a source of stress for many seniors, so it’s important to know what kind of tax burden you’re facing. At the same time, don’t discount the idea of ​​retiring in a state that imposes social security. You might avoid paying these taxes based on your income, but even if you can’t, this state might have other redeeming qualities that make it a great place to live in your senior years.

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