Retirement Havens: Florida, Arizona…Pennsylvania

Part of planning for the future is deciding where to spend the golden years, as marketing types like to call them.  For those people who have an option where to live in retirement, there are the usual suspects: Florida, Arizona, North Carolina and there is the state that is one of the most popular among retirees, Pennsylvania.

By the way, the idea that you need to remain in the city where your law practice is located in order to continue to have an involvement in that practice is fast fading away. Just last week, a lawyer from a suburb of Detroit, who is suing one of my clients, called me from somewhere deep in the heart of North Carolina, from where he is able to be heavily involved in the frivolous litigation he is pursuing. 

Why is Pennsylvania so popular among retirees, especially those in the neighboring states of New York, New Jersey, Delaware and Maryland?  One important reason is the taxation of retirement income, such as Social Security and retirement plan distributions. There is no income tax imposed by Pennsylvania on bona fide retirement income, which is not the case in the neighboring states. If your income in retirement consists only of Social Security benefits and amounts you withdraw from a 401(k) plan, for example, your Pa. income tax will be zero. That is not the case, again for example, in New Jersey.  And if you worked in New Jersey to earn a retirement benefit, New Jersey can’t reach across the river to tax it if you move to Pennsylvania, under federal law.  (But here’s a caveat: Be sure to check the Pennsylvania rules to be certain that your retirement distributions qualify. Nearly all distributions after age 59 1/2 will qualify, but check the rules anyway.)

Yes, we have a sales tax, which Delaware does not have (although there are a large number of “big box” stores suspiciously close to the Pennsylvania border) and yes, we still have the state store system (again, some really good wine stores just across the border in New Jersey and Delaware, I’m told), but Pennsylvania has a big advantage in the taxation of retirement income.  That, combined with reasonable property taxes and access to a world of sports, culture and recreational activities, is why Pennsylvania has one of the largest populations of retirees of any state.

Robert H. Louis
Saul Ewing

Explore posts in the same categories: Robert H. Louis, Trusts and Estates

One Comment on “Retirement Havens: Florida, Arizona…Pennsylvania”

  1. Kat W. Says:

    Excellent point. My husband and I just moved into a 55+ community at Alden Place in Cornwall, PA. Besides having a big advantage on taxation of retirement income, PA proved to be an ideal location since it’s centrally located between major cities like the nation’s capital and NY, where three of our children work and live. We know a couple of friends who hesitated to move or “retired in place.” Most of them eventually moved into assisted dwelling and retirement communities, mostly for medical and lifestyle reasons.

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