Our Top Places to Retire
Think about the characteristics you’d choose for a great place to retire. Perhaps a vibrant cultural life? Intellectual stimulation? A wide range of outdoor activities? An attractive setting? Access to top-notch health care? When we set out to plan our cover story, we took into account all those things. But at the very top of our list was one word: taxes.
See Our Slide Show: 10 Great College Towns to Retire to
For retirees concerned about making their money last, keeping living costs under control is paramount so that they can afford to soak up the cultural life, take advantage of the outdoor activities and pay for the top-notch health care. In screening college towns for our list, senior associate editor Sandy Block started with one basic requirement: "The towns had to be in states that are tax-friendly to retirees."
Sandy is just the right person to make those choices. As a key member of the team that built our Retiree Tax Map, Sandy helped construct a tax profile for each of the 50 states and the District of Columbia, rating them as friendly, unfriendly or mixed. A few of the towns on our list are in "mixed" states, but none are unfriendly.
That rating system explains some notable absences. For example, you won’t find any West Coast towns in California or Oregon, nor will you find any charming New England villages. “With the exception of New Hampshire, all of the states north of Pennsylvania are tax-unfriendly,” says Sandy, mostly because of high property taxes. Contrast that with Mississippi—home to Oxford, tops on our list of college towns, and one of our ten tax-friendliest states.
Property taxes can take a big bite out of your income. But to see how you’ll be affected by taxes in retirement, you should also look at income and sales levies, paying close attention to what’s excluded from each. For example, some states with income taxes exclude pension income or IRA withdrawals, and prescription drugs are often exempt from sales tax. Also, 19 states and the District of Columbia have estate or inheritance taxes, some of which kick in at $1 million or less. You can find details on each state on our Retiree Tax Map, which also lets you do side-by-side comparisons of up to five states.
Narrowing the search. Of course, taxes aren’t everything. One city we considered in a tax-friendly state was Tucson, home to the University of Arizona. But we decided to focus on smaller college towns with robust arts, culture and sports scenes, great restaurants, and an affordable cost of living. Our choices are spread across a range of geographic locations and climates.
Downsizing our search didn’t make it any easier. When senior editor Mark Solheim returned from visiting Oxford (population 20,865), he asked for more space to write about his impressions. In addition to football, Faulkner and food, Mark adds a fourth observation: “It struck me as a family-values kind of place.” One retired couple he met had moved from Virginia to be near their grandchildren, and the Oxford Newcomers Club provides an instant social network. It didn’t take Mark long to feel connected in a place where “people make eye contact and say hello.” After dining on shrimp and grits and sampling a selection of regional bourbons, he was sold on Oxford as our top choice. "If you ever lived or went to school there, you’d want to go back."
P.S. For in-depth information on choosing a place to live in retirement, minimizing the tax bite and creating an income stream, check out our newest product, Knight Kiplinger’s 10 Steps to a Richer Retirement, an essential toolkit aimed at people in their fifties and older.