Navigating retirement income needs above and beyond Social Security requires understanding a state-by-state guide to supplemental income.
Quick Takes
- Cost of living varies significantly, influencing supplemental income needs.
- Resource limits for SSI eligibility include cash and other convertibles.
- Each state handles taxation of retirement income differently.
- Additional planning is necessary when considering non-taxed resources.
Financial Strategies Beyond Social Security
The average Social Security benefit for retirees, as highlighted in the January 2024 Social Security Monthly Statistical Supplement, stands at $1,860.23. This often falls short in covering the full scope of retirees’ monthly expenses. Retirees may need to scrutinize cost-of-living indices and typical spending behaviors, which vary across the 50 states. Planning for supplemental income is crucial to meet these unmet needs. Further understanding of resource and deemed resource limitations is also necessary.
Living in states with no personal income taxes like Alaska, Florida, and Nevada can significantly help retirees as retirement income, including Social Security, remains untaxed. Meanwhile, states such as California impose high-income tax rates and tax most forms of retirement income, significantly affecting retirees’ cash flow. Crafting an effective financial strategy becomes essential in these states, as suggested by GOBankingRates’ detailed analysis.
Understanding State Tax Variability
States offer varying degrees of taxation and exemptions on retirement incomes. In Alabama, the first $6,000 is tax-exempt; Arkansas allows a $6,000 deduction, whereas Social Security remains untaxed in both states. Mississippi and Georgia also have provisions for income exclusions. States like New Jersey offer deductions for those aged 62 and older. Such exemptions and deductions make a significant difference in retirees’ net income.
Planning based on these state-specific policies can help retirees retain more income, especially in those states that offer substantial exclusions for retirement income, including Social Security.
SSI Eligibility and Resources
Everyday resources such as bank accounts, stocks, and property, can impact eligibility for Supplemental Security Income (SSI). Individuals with countable resources over $2,000 and couples over $3,000 may find themselves ineligible for SSI benefits. Yet, many resources are exempt from these calculations, providing a financial buffer. Selling assets over these limits may allow conditional SSI benefits, though repayment is expected.
Dealing with these resources involves crucial planning. States like Connecticut and Delaware offer partial exemptions or exclusions for certain retirement incomes, allowing retirees to better manage their resources without impacting their SSI eligibility.
Sources:
- Supplemental Security Income SSI Resources
- Retirement Taxes: How All 50 States Tax Retirees | Kiplinger
- How Much Money You’ll Need To Supplement Your Social Security in Every State
