Forget what you know about withdrawal rates. The key to making your nest egg last is to spend less money than you earn.
Due to state tax law differences, however, you'll soon learn that where you live during retirement largely dictates what you spend.
Some states, such as Minnesota and Vermont, impose a hefty tax on retirement income, while California's top income tax rate is a budget busting 13.3 percent. Others, including New Jersey, have the highest property tax rate in the nation, while 14 states tax Social Security benefits either in part or in full. They are: Colorado, Connecticut, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia. (Not all, though, made our list of least tax friendly states for retirees.)
Also, the sheer size of the aging baby boomer population has encouraged most states to consider more tax-favorable legislation for seniors, said Kathleen Thies, state tax analyst for CCH tax services firm in Riverwoods, Ill. And some relief programs have already been enacted.
But due to their combination of taxes on ordinary income, pensions, real estate, inherited property and estates, the following 10 states can best be described as hostile territory for retirees.
The list was culled with data collected from CCH, the Tax Foundation, state revenue departments, retirementliving.com and the Federation of Tax Administrators. (Property tax rates, compiled by the Tax Foundation using Census Bureau data, are through calendar year 2011 and reflect the mean property tax as a percentage of mean home value.)
And because tax laws impact retirees differently, depending on their financial circumstances, we did not attempt to rank each state in terms of tax friendliness—or lack thereof. The states are instead presented in alphabetical order.
By Shelly K. Schwartz, Special to CNBC.com
Posted 22 Aug. 2013