Wednesday, November 28, 2012

Massachusetts Ranks 46th in Best States to Retire - High Cost of Living, Taxes, Climate concerns for Retirees.

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The rankings for the top ten states for retirees has been released by A.A.R.P. – the top ten are: Texas, California, South Dakota, New Mexico, Florida, Colorado, Virginia, Arizona, Utah, Idaho and Hawaii. Hawaii ranks first for weather and life expectancy, however, aside from warm weather and life expectancy, the states ranking highest in terms of economy for those on fixed incomes are: Texas (also warm climate), Virginia, Utah and Idaho.

The study, conducted by on all fifty states, also ranks those on the bottom. The rankings are based on the economy (taxes), access to quality health care, the climate, and crime rate, so it comes as no surprise that Massachusetts is at the bottom, ranked 46th because “Like New York, Massachusetts suffers from being one of the more expensive states in the nation, in terms of both property taxes and cost of living.”

It isn’t as if anyone living in Massachusetts isn’t aware of the high cost of everything, let alone “property taxes”, which are capped at the famous 2-1/2%. It’s the other taxes that are constantly on the rise, from taxes on utilities, to the state income tax, state sales taxes, all of which affect seniors (as well as anyone trying to stick to a budget). The cost of medical premiums is also a factor, generally rising annually to keep up with the state’s mandates and rising cost s of doing business as a health care provider in the Bay State. The fact that there are so few health insurance providers (limited by the Commonwealth), the “pool” isn’t large enough for the individual carriers to sustain, therefore, as the cost s of claims increase, those are passed onto the consumer. Other factors contributing to the high cost of local and state taxes is unemployment, specifically among those public employees who are continuously “bilking” the system.

What taxes are assessed in Massachusetts? Everything from local taxes, including meals taxes, to state taxes on income (including unemployment compensation and social security) to purchases (outside of food and clothing up to a limit), wireless, cable, utilities, water (EPA fees), gasoline, etc. Massachusetts has an effective state and local tax rate of 10.4%, according to the Tax Foundation. The report was released in 2010, and it is not without some concern that the situation has not improved.

For those whose income is modest, moving to a state such as Texas, might make sense, if, and only if, one can afford to sell one’s home (if anyone would be buying), and have the wherewithal, on social security, to pack up and leave.

What does Texas have to offer retirees? a 7.9% combined state and local tax rate (Tax Foundation)for starters. Forbes Magazine ranks cities with the highest income when adjusted for the lowest cost of living making the top 10: Houston/Sugarland, TX, Dallas/Ft. Worth/Arlington and Austin/Round Rock/San Marcos.

This tells the average retiree, or those facing retirement to get out of “Dodge” if at all possible, especially if one’s state (or Commonwealth), offers burdensome tax rates to the point where one is forced to choose between food, heat or that life saving prescription. Of course, that is if one can “afford” to retire - once faced with living on social security and a modest pension (if that is even an option), those who are able are seeking employment to supplement the necessities of life.

As this blogger is on the flip side of fifty, it is not without some concern that thoughts of retirement, especially living Massachusetts, must be weighted by the cost of living, and finding a way “out”. It is more than probable, that regardless of age, individuals living in the appropriately dubbed “Taxachusettes”, are also looking at options and many have taken leave of the Bay State. So many residents have left Massachusetts, in fact, that the State Lost a Congressional Seat during the last census, due to myriad reasons. Some believe it is the solid Democrat lock on the State (which affects taxes (more!), the costs of mandated benefits to the mandatory health care law (more!), and the Taxes!!. There are those who decide to stick it out, economy aside, and bad weather aside, simply because, as Baby Boomers (those born between 1945 and 1955), are more prone to stay put, no matter the climate or the high taxes, and those may find themselves, as the tax rates are increased (there simply is no other way for the Federal and State Governments to continue to live the high-life, without imposing new taxes – it is now a given, and anyone who believes that “taxing the rich” is the answer, needs a reality check. Any taxes imposed on businesses will cause one of three reactions. The business will either move out of the State/Country, causing loss of revenue for the state and federal government, the business will effectively shut-up shop (See Twinkies) causing loss of revenue for the state and federal government, or the business will pass the increased costs of doing business onto the consumer, while cutting back its workforce and pushing full-time employees into part-time positions (cutting the revenue to the State and Federal Government). In the first two scenarios, the government will be forced to collect revenue from other sources, and since the governments only other source of income (revenue) is the taxpayer, expect an increase. In the third scenario, one can expect both a higher cost of goods or services, as well as a tax increase.

Therefore, unless one moves to another County (ex-pat) with a low cost of living, one will most likely find that the best states to retire will become more costly within the next two years, those living in states that are ranked towards the bottom, may have some difficult decisions to make.

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