Retirement planning is the best way to make sure you have a comfortable life after your employment years. However, many disabled individuals don’t get enough retirement benefits to be able to make ends meet. As such, it’s essential to know which states are the best for disabled retirees.
Some of the best states for disabled individuals to retire in are Pennsylvania, Vermont, South Dakota, Florida, Nevada, Illinois, Mississippi, New Hampshire, South Dakota, Texas, Washington, and Wyoming.
Read below to find out what makes these states the best for disabled people to retire in.
How the SSA Calculates Retirement Benefit
Many people are curious about how their retirement benefits are calculated. The Social Security Administration (SSA) calculates your Social Security retirement benefits based on your total lifetime earnings. Actual earnings are “indexed” or adjusted to reflect fluctuations in average wages that have occurred since the year in which the earnings were received.
When determining your Social Security benefit, Social Security uses your highest 35 years of earnings to determine an average indexed monthly wage. They then use a method to convert these earnings into your Primary Insurance Amount (PIA.) The PIA is actually the base retirement benefits an individual would receive if they retired at the normal retirement age. PIA, or the primary insurance amount. This is the amount you would receive upon reaching your full retirement age, which, depending on your year of birth, is 65 or older.
How Early or Delayed Benefits Affect Retirement Benefits
The SSA gives applicants the option to begin receiving benefits earlier than their full retirement age. You can start receiving your Social Security retirement payments as early as age 62, albeit at a lower amount. If you decide to retire before you reach full retirement age, you will see a reduction in your benefit amount upon reaching full retirement age.
The SSA also gives people the option to continue working instead of retiring at full retirement age. If you wait to start collecting Social Security until after your full retirement age, you’ll get a larger check (based on your birth year). In this case, your benefit amount will keep increasing until you begin receiving benefits or reach age 70, whichever comes first.
What Factors Make a State Better for Disabled Retirees?
Disability affects people in different ways, but by comparing data across many different factors, a person can get a better idea of how effectively their unique needs will be met in each state. There are four main types of considerations:
- Current Economic Conditions: Considerations such as average earnings, unemployment rates, and availability of particular no-cost job-search resources
- Affordability: Refers to a number of factors, including the price of housing, the average cost of living, and the minimum wage required to maintain a certain standard of living in a certain state.
- Livability: The ease with which residents can get around throughout the state and the degree to which a sense of community can be found there.
- Medical Care: Cost and accessibility of health care, as well as the number of programs, like Medicaid, that help people with disabilities.
A higher ranking reflects an overall better result across all four areas, making that location more preferable for people with disabilities.
The Best States to Retire in For Disabled Individuals
This section contains a list of the best states to retire in for disabled people based on metrics like affordability, livability, and medical care.
Pennsylvania
Pennsylvania tops our list as the best place to retire if you have a disability.
When it comes to how easily accessible public transportation is in the state’s major cities, Pennsylvania comes out at the top. Pennsylvania is also one of the most walkable states in the US, making it a great place to go if you’re looking to get some exercise and breathe some fresh air.
The majority of residents who are disabled also have health insurance, with many having coverage for themselves and their families. The percentage of people with disabilities who reported that they have always been unable to afford health care is relatively low, with most people reporting that they have always been able to afford medical care.
Vermont
The state of Vermont comes in at number two on our list of the best states for those living with disabilities. In Vermont, almost all people who have a disability are covered by some sort of medical insurance.
Very few residents in Vermont find healthcare to be inaccessible, despite the fact that their average annual earnings are quite low, and the cost of disability-related healthcare is relatively high.
North Dakota
The economic and affordability conditions of North Dakota make an excellent case for disabled people looking to move to this state. North Dakota has a very low unemployment rate, and most people with disabilities are able to join the workforce in some capacity. North Dakota also has the most Ticket to Work centers, which offer free employment programs to people who receive Social Security disability payments.
The median income of $26,596 ranks ninth highest, while the poverty rate for people with disabilities is the 17th lowest at 18%. North Dakota is also known for its low cost of living. Monthly housing costs are really low at $836, while the minimal wage required to maintain a basic standard of living is $13.
Tax-Friendly States for Disabled Retirees
Taxation is a big concern for many people retiring on Social Security disability benefits. However, there are states where taxation is relatively low and retirement benefits are exempt.
Florida
Many are familiar with Florida’s pleasant winter climate and beautiful beaches. Florida has a mild climate, but that’s not the only benefit of retiring there.
Due to the lack of a state income tax, retirees who continue working part-time can keep more of their hard-earned money. This also means that your pension or Social Security check will not be subject to state taxes.
If your home is worth the state’s median value of $182,400 in 2023, you can expect to pay a property tax bill of $1,773 per year in Florida. The state sales tax rate is 7.02%. Some cities and towns may charge an extra sales tax.
Illinois
Although there is an income tax in Illinois, several forms of retirement income are exempt. When calculating their federally adjusted gross income, retirees can deduct their Social Security and pension income. This includes income from employee-defined benefit plans, IRAs, SEPs, government retirement plans, and military service retirement plans.
Nonetheless, retirees may be subject to taxation in other ways. The taxes on real estate are quite expensive. In Illinois, the annual median property tax on a home valued at $202,200 is $3,507. In addition to the standard 6.25% sales tax, many states also throw in a sales tax at the local level.
Mississippi
State income taxes in Mississippi do not apply to a wide variety of retirement incomes. Payments received from Social Security and pensions, including those received from public and private pensions, as well as withdrawals from IRAs and 401(k) plans, are deducted or excluded from Mississippi’s taxable state income.
Property taxes in the state are also among the lowest in the country. For a house worth $98,000, the average real estate tax in Mississippi is $508 per year. However, retirees in Mississippi should be aware of the comparatively high 7% state sales tax.
Nevada
Nevada’s casinos and vibrant nightlife may be what initially drew you there, but the state’s relatively low tax rates may ultimately be what convinces you to stay.
Since Nevada does not have a state income tax, you do not need to be concerned about being subject to taxes at the state level on the money you earn through retirement employment, whether it be a part-time job or the income you receive from Social Security or a pension.
The tax burden on property is likewise relatively low. A home that is valued at the median amount in Nevada, which is $207,600, will have an annual property tax bill of $1,749. The state sales tax rate is 6.85%, though, so that’s a downside.
New Hampshire
The state of New Hampshire does not impose an income tax on benefits received from Social Security, pensions, payouts from retirement accounts, or money earned from a retired job by residents of the state.
New Hampshire exclusively taxes dividends and interest payments. Because there is no state sales tax, retirees can enjoy tax-free purchases. Property taxes, however, are among the most expensive in the United States.
South Dakota
South Dakota is yet another state without an income tax. Income from sources like Social Security, pensions, retirement accounts, and even some part-time work is exempt from state taxation for retirees.
The state of South Dakota does, however, impose taxes on both sales and property. South Dakotans pay an annual median of $1,620 in property taxes on a median-valued home of $126,200. While South Dakota has one of the lowest state sales taxes in the country, at only 4.2%, local governments may impose their taxes on top of that.
Tennessee
The state of Tennessee does not impose a tax on income received from Social Security or pensions, nor does it tax earnings from employment. In Tennessee, the only forms of income that are subject to taxation are dividends and interest; however, taxpayers who are 65 or older and make less income are exempt from this tax.
Property taxes are also inexpensive. home worth $137,300 has an annual median property tax rate of $933. However, keep in mind that there is a 7% sales tax.
Texas
Texas doesn’t have a state income tax, so retirees don’t have to worry about paying taxes on their Social Security retirement income, pension payments, or 401(k) and IRA withdrawals. However, there are other methods by which the state brings in revenue. In many areas of the state, the amount of money paid in property taxes can be quite high.
A home in Texas that is worth the median value of $125,800 will have an annual property tax bill of $2,275. In addition, a sales tax of 6.25% is applied to most purchases.
Washington
There is no state income tax in Washington, so residents don’t have to worry about having to pay a significant amount of money to the state for their share of the income they earn from sources such as Social Security, retirement account distributions, pensions, or a post-retirement job.
But you will have to pay taxes on your property. A home that is valued at the median amount of $287,200 will have an annual property tax bill of $2,631. Many purchases are subject to an additional sales tax of 6.5%.
Wyoming
There is no income tax in the state of Wyoming. This means you won’t have to pay taxes on any money you bring into the state, whether from work or retirement. The state sales tax is only 4%, so retirees won’t have to worry about paying a lot of money in taxes when they make a purchase.
And if you own a home, you won’t have to pay a lot in property taxes. For a home with a median value of $184,000, the annual median property tax in Wyoming is $1,058.
Conclusion
When planning for retirement, there are a lot of things to consider, especially for people who are disabled. And while the cost of living, accessibility, and affordability are great metrics, it’s also essential to take note of taxation rates.
