If Pennsylvania is your post-career landing spot, you’ve come to the right place. This beautiful state offers more than just historical charm and cheesesteaks. It boasts significant tax advantages and plenty of options for an active or relaxed retirement lifestyle.
One of the biggest draws for retirees in Pennsylvania is its tax-friendly status. Social Security and pension income for those over 60 are exempt from state taxes, and withdrawals from retirement accounts like 401(k)s and IRAs receive the same treatment. This can mean more money in your pocket at the end of the day.
But this great retirement state doesn’t come without some not so tax-friendly woes. One downside is Pennsylvania hits you with one of the highest property tax rates in the nation. This can be a major expense to consider when planning your retirement.
The key to a successful retirement in Pennsylvania, or any state for that matter, is thorough research. We’ll get you started with everything you need to know about retiring in Pennsylvania so your retirement lasts as long as it can.
Before you pack your bags and shell out for a moving van, consider both the pros and cons of moving to the “Keystone State.”
Pros
State tax friendly: Pennsylvania exempts state taxes from Social Security income, pensions for residents over 60, and withdrawals from retirements. (It also has a relatively low state sales tax at 6 percent.)
Affordable living: Pennsylvania boasts a four percent lower cost of living compared to the national average. This makes it easier to stretch your retirement income further. (Note: Rural areas are much more affordable than major PA cities.)
Quality healthcare: The state has a good network of hospitals and healthcare providers, ensuring access to quality medical care throughout your retirement.
Plenty to do: Whether you crave outdoor adventures in state parks (Presque Isle State Park), historical explorations (Liberty Bell), or cultural immersion (Philadelphia Museum of Art), there’s plenty to do for everyone.
Cons
High property tax: Pennsylvania has some of the highest property tax rates in the country, which can be a significant burden for retirees on a fixed income (see more below).
Additional hidden sales taxes: While the base sales tax of 6% is reasonable, many localities tack on additional sales taxes so factor that in when budgeting for everyday expenses.
Since this state’s weather could be a pro or a con for you, you can decide which column to place it in. Pennsylvania offers a change of scenery throughout the year. Summers and warmer months can be nice to explore and enjoy the sunshine, but winters can be cold and often linger. If you desire to be a snowbird, Pennsylvania summers may be great for you.
Retirement income in Pennsylvania is not taxable and offers a welcome tax break exemption for retirees. This applies to residents aged 60 and over and includes Social Security benefits, pension income, and withdrawals from retirement accounts like 401(k)s and IRAs.
When it comes to retirement planning, this can be a major advantage when budgeting for retirement expenses.
No, Social Security in Pennsylvania is exempt from state income tax. Why is this an advantage? It allows you to retain more of your retirement income and offers a significant financial benefit if this is your only source of retirement income.
No, Pennsylvania does not tax withdrawals from 401(k) accounts for residents aged 60 and over. This allows them to keep more of their retirement funds.
Some important 401(k) factors to consider:
Pennsylvania is known for having high property taxes, which can be a significant financial burden for retirees on a fixed income.
Property tax rates for PA sit at around 1.53 percent and residents pay an average of $3,022 in annual property taxes.
Property taxes are based on the assessed value of your property. A millage rate—the amount of tax you pay per dollar of your property's assessed value—is then multiplied by the assessed value to determine the annual property tax amount. So, for example, if your property's assessed value is $100,000 and the millage rate is 0.025, your annual property tax would be $2,500 ($100,000 x 0.025).
A financial advisor can factor property taxes into your overall retirement financial plan and explain to you how this works.
Pennsylvania offers a variety of retirement communities catering to different lifestyles and budgets. There are three main types:
Getting into a retirement community involves meeting an age requirement (usually 55 or 62), submitting an application, and potentially paying an entrance fee (especially for CCRCs with prices ranging significantly). There are also monthly fees that cover housing, amenities, and sometimes meals or basic healthcare services.
When choosing a community, consider location, type of community, cost, amenities, resident services, and your own needs and preferences. Costs vary greatly regarding both entrance fees and monthly fees, so do your due diligence when it comes to finding the right community for you.
Retiring in Pennsylvania offers a combination of financial advantages and exciting opportunities, both of which you visualize when you think of retirement. The state exempts most retirement income from taxes, including Social Security, pensions, and retirement account withdrawals. This translates to a bigger chunk of change for you to enjoy more out of your retirement.
The overall cost of living in Pennsylvania is also slightly below the national average, with even more affordable options in rural areas, giving you more financial freedom to find a place you want to settle into. With a robust healthcare network and a wealth of things to do, including scenic state parks, historic landmarks, and places to find that hard-earned R&R, there's something for everyone to enjoy in Pennsylvania.
Interested in learning more about retiring in Pennsylvania? Consider attending one of our retirement seminars or webinars, hosted by experienced financial advisors who can assist with all your retirement planning needs. Check out what Pennsylvania events are located near you!
