The most tax-friendly states for your retirement income
Which states will drain your retirement savings the most?
In retirement, you'll likely need to replace about 40% of your pre-retirement income from sources such as IRAs, 401(k)s, and employer-sponsored pensions. That’s generally what it takes to sustain a lifestyle comparable to the one you enjoyed while working.
Given that, it’s worth carefully considering where you live in retirement – especially since some states tax these income sources heavily, while others offer full or partial exemptions. Choosing a tax-friendly state could help your retirement savings go further.
This article is part of an ongoing series examining how states tax various sources of income, including Social Security benefits, retirement account distributions, defined benefit pensions, investment income (capital gains, dividends, interest), earned income, pass-through income (K-1), rental income, and other income typically reported on Form 1099.
In this installment, we focus on which states are most tax-friendly when it comes to income from retirement accounts and pensions.
