Secure Your Future
Lots to consider when choosing a retirement location
Oct 29, 2009 2:20 PM
A survey of retired teachers receiving UFT Welfare Fund Benefits shows that the 57,916 recipients live in all 50 states, plus Puerto Rico, Washington, D.C., and the Virgin Islands, as well as 33 foreign countries including Israel, Canada, Trinidad and Tobago, France, Ireland, Italy and the Dominican Republic. The UFT has retiree outreach coordinators to assist members in several out-of-state locations where retirees live, including Arizona, California, Florida, Nevada, North Carolina, Puerto Rico, Washington, D.C., and Israel.
It should not surprise you that the vast majority of retirees live in the same states where they lived while working. More than 45,000 live in the metropolitan area. Many people call New York City the largest retirement village in the world. After the metropolitan area, the greatest number of retirees — more than 6,400 — live in Florida.
How do members decide where to live in retirement? Some decide based on lifestyle — does the area in which they want to live provide the activities in which they would like to participate? Other reasons include climate, family, friends and birthplace. And many do not decide until they study the cost of living and the tax situation in their location of choice.
When thinking about taxes, not only should a member consider local and state income taxes, but also sales, property, inheritance and estate taxes.
An excellent Web site for tax and other important retirement information is www.retirementliving.com. The Web site has areas that deal with jobs for seniors, special merchandise for seniors, retirement living news, retirement communities, great places for retirement and a section on our discussion of taxes state by state.
Income taxes
Seven states currently have no state income taxes. They include two favorites of our members: Florida and Nevada. A state where very few of our members live is Alaska, which even pays a sum to each resident each year. Some states provide tax relief on retirement income and may be a better value than some tax-free states. New York State, for instance, does not tax Teachers’ Retirement System pensions, withdrawals from the Tax-Deferred Annuity, Social Security and up to $20,000 of other retirement income for people over age 59˝.
Sales tax
At this writing, five states do not have any sales tax. The states where TRS retirees are likeliest to reside all have a sales tax. The highest state sales tax is the 8.25 percent in California. In addition to state sales tax, many localities also impose their own sales tax. Sales tax is subject to increase. In 2008, more than 500 U.S. cities either raised or initiated a sales tax.
Property tax
Another factor that should be taken into consideration when deciding where to live is property tax rates. These vary significantly from state to state and locality to locality. The tax rate can change over time, and when governments need money they often raise taxes. If this is an important factor in your decision making, make sure to find out not only current tax rates but the trend over recent years.
States with the lowest median real estate tax rates are Louisiana, Alabama, West Virginia, Mississippi and Arkansas. A total of about 90 UFT retirees live in these states. The highest median tax rates are in New Jersey, New Hampshire, Connecticut, New York and Rhode Island. More than 46,000 UFT retirees live in those states. It looks like people are willing to pay higher taxes if they get more of what they are looking for.
Inheritance and estate taxes
An inheritance tax is a tax made on the part of an estate that an individual receives. An estate tax is levied on the entire estate before dispersal.
Inheritance taxes are collected by 11 states. There are no federal inheritance taxes.
On the other hand, there is a federal estate tax and 17 states levy their own estate taxes. Estates valued at $3.5 million or less are exempt from federal estate taxes this year. In 2010, the federal tax will disappear for a year and will come back in 2011 with a $1 million exemption.
New York State has no inheritance tax, but does have an estate tax.
To get a summary of the various taxes in the state you may be planning to retire to, go to www.retirementliving.com.
We hope this article is helpful and that you take the time you need to make the important decision of where you are going to live for the rest of your life.
This tax information should be checked with your own tax advisors. The UFT cannot provide tax advice. In all cases, the specific provisions of the governing laws, rules and regulations prevail.
Who is your beneficiary?
You either received or soon will receive your Annual Benefit Statement. Check it to see if you have appropriate beneficiary forms on file for both the Qualified Pension Plan and the TDA. If no beneficiary is listed or if an inappropriate beneficiary is listed, request designation of beneficiary forms from either the UFT or TRS.
You are putting the financial security of your loved ones in jeopardy if you do not file the required forms.
TRS holidays
TRS offices will be closed on official New York City holidays: Nov. 3, Nov. 11, Nov. 26 and Dec. 25 in 2009; and Jan. 1, Jan. 18 and Feb. 15 in 2010.
“Secure your future” is compiled and written by Mel Aaronson, Sandra March and Mona Romain, teacher-members of the NYC Teachers’ Retirement Board. For further information on items discussed, call your UFT borough office or the TRS. BRONX: 1-718-379-6200; BROOKLYN: 1-718-852-4900; MANHATTAN: 1-212-598-6800; QUEENS: 1-718-275- 4400; STATEN ISLAND: 1-718-605-1400; Teachers’ Retirement System: 1-888-8NYC-TRS (692-877), www.trs.nyc.ny.us.
