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This link is added on August 22nd, 2021: Top 10 fastest growing cities in Pennsylvania
https://patch.com/Is Retiring in Pennsylvania a Good Idea? 12 Pros and Cons
The pros of retiring in Pennsylvania include low cost of living, no taxes on retirement income, and access to natural beauty, among other things. However, the state also has some drawbacks like an inheritance tax, cold winters, and lack of urban buzz.
Pros:
One of the defining factors of what makes a place great for retirement is how much you need to spend to sustain your lifestyle as a retiree. An expensive state could mean you have to work longer before you can retire. But with Pennsylvania’s cost of living among the lost in the state, this can be a lucrative place to retire.
If you are already near retirement, how much you will retire with is likely defined already in your retirement planning. The same amount of money buys you different levels of freedom defined entirely by how much the cost of living is.
Therefore, you will have to work less to retire in Pennsylvania, and if you are near retirement, you will be able to do more with your money in the state.
As of June 2020, the median sale price for a home in the United States is $295,300. In contrast, the typical home price in Pennsylvania is $208,774. While your lifestyle defines how much money you will spend per month, the difference in home prices should be a good indicator of how little it costs to live in the state.
No Taxes on Retirement Income
The words ‘no’ and ‘taxes’ form the most enticing pair in the entire English language. And in Pennsylvania, you can enjoy 0% taxes on your pension income. This, of course, does not mean that you can collect rent from multiple properties you own, as a retiree, and declare it as a pension.
In the sense that Pennsylvania exempts from taxation, Pension income falls under four main categories:
- Social Security: If you receive social security benefits based on your contribution to the system as a working citizen, Pennsylvania, will not tax the amount.
- Pension: With better opportunity cost elsewhere, many retirees have planned their pension with their employers or other organizations. The amount you receive as a pensioner will not be taxed by the state.
- Individual Retirement Account (IRA): IRAs are among the most popular methods of ensuring retirement income because they offer tax advantages. If you plan your retirement and have an active IRA, you would be pleased to know that Pennsylvania tops the IRA advantages by not taxing income from the account.
- 401k: Usually, 401Ks are matched by employers. Working citizens save their money in their 401Ks and employers, often (but not necessarily) match the amount saved. In Pennsylvania, you will not be taxed for the income generated from your contribution to the 401k, nor will the income generated by the employer’s portion be taxed.
Great Sales Tax With Many Exemptions
The cost of living is brought down by another factor: no sales tax on many transactions. While the Pennsylvania sales tax generally stands at 6% (not higher than the United States average), many transactions are exempt from this.
It is worth noting that where sales tax applies, Philadelphia pays 2% higher than the state’s tax, and the Pittsburgh area pays 1% over. And with that clarified, below are some of the activities and purchases where you will pay no sales tax:
- Amusement parks: Whether visiting with grandchildren or taking a solo trip, you will pay no sales tax on ticket purchase, ride fee, or concessions in the park.
- Recreational industries: Most retirees won’t be interested in amusement parks aside from a day out with the grandkids. That is okay because, as a retiree, you won’t have to pay any sales tax on leisure as long as a business provides it within the state’s definition of the recreational industry.
- Food: Moving on from recreation, food is likely to be one of your most frequent purchases. Food will be relatively cheaper overall because you don’t have to pay any sales tax on food in Pennsylvania.
- Clothes: Who needs to make clothing more expensive? When you retire in Pennsylvania, your clothes shopping bill will be smaller with no sales tax.
Great Healthcare
Since most people retire as senior citizens, healthcare plays a crucial role in their decision. As people who need more attention and care, they do not want to risk retiring in a state where the healthcare facilities do not meet their requirements.
In this regard, You will find two of the best hospitals in the United States: UPMC Shadyside and Philadelphia.
Furthermore, there is always a chance of new treatments coming to the market that will help senior citizens. And to have access to cutting-edge medical treatments, one must be in a state with medical universities that conduct advanced research in the field. Two universities excellent in this regard, Bucknell and Dickinson, call Pennsylvania home.
Great Outdoors and Plenty to Do
Retirement is often painted as a bleak picture of having little to do, no social life, and minimal human contact. That can be a reality of many retirees who rely too much on their existing social circle for their pastimes. Retiring in different states or away from family can create isolating bubbles, which may discourage retirees from being active. A sedentary lifestyle can often lead to a decrease in mobility and quality of life.
In Pennsylvania, you have plenty to do outdoors, including activities enjoyed by active seniors. Activities that match retirees’ age group present opportunities for forming new friendships, social connections, and relationships. The friendships you will make golfing in one of Pennsylvania’s numerous golf courses and trekking by the rivers will be with people who match your interests. If you love nature, there are plenty of forests, mountains, and farmlands to please your eyes.
Sports Culture
Retirees usually fall into two major categories. Those who enjoy taking in nature and scenery, going on long quiet hikes, and enjoying the company of a few be it golfing or fishing. And for them, the previous pro makes Pennsylvania compelling. The second category is those who are passionate about sports and love the fan culture, live games, and comradery of the fanbase.
For fans of sports, retiring in a state with no sports culture can be a serious drawback. After all, not getting to see cheers in the streets or having people enjoy a game can be sad. In Pennsylvania, you don’t have to cheer for a team from afar.
With two popular baseball teams and two popular football teams, Pennsylvania has an active sports culture. You can go down to the local barber and have a conversation about the Pittsburgh Pirates or the Steelers. And if baseball isn’t your thing, everyone will be talking about the Philadelphia Phillies if not the Eagles.
Hand-Cooked Meals Are Available at Convenience Stores
As a retiree, the last thing you want is resorting to processed junk food because of expensive restaurants and the inability to cook for yourself. Usually, pre-packaged foods are available at convenience stores, but in Pennsylvania, stores often have hand-cooked food that you can buy for just as little.
Great Scenery, Be It Day or Night
Among the issues of retirees is the blinding lights in most places as states move rapidly towards urbanization. At the advanced retirement age, one is not too excited about looking up at the sky to see no stars because of thousands of streetlights and billboards peppering across the region.
Thankfully, Pennsylvania is exceptional in this regard. The large forests balance out the city lights and give a clear view of the night sky with an awe-inspiring front seat to stars and captivating nightly hues across the galaxy.
Accessible to Cities on the East Coast
As a retiree, you would like to meet up with friends, have a family visit, and go to different places for novelty. It is the sameness of retirement that most people wish to avoid.
Location plays a significant role in this. After all, you would not likely go to many places if everything takes multiple hours of driving. It also reduces the frequency with which others visit you. But if your friends and family all live on the east coast, this is a great reason to retire in Pennsylvania because you are essentially a few hours away from them.
Cons of Retiring in Pennsylvania
Regardless of how great a place may seem, every state has its drawbacks. It is important to have the full picture before you commit to spending your retirement years in Pennsylvania. Below are the cons of living in the state as a retiree.
It Gets Extremely Cold
While teenagers may love a snowball fight, those of retirement age are not exactly fond of snow. With advanced age comes a decreased tolerance to colder climates. Add to that the responsibility of shoveling a driveway, ice-dams on house roofs, and slippery ice on walk paths, and suddenly Pennsylvania winter becomes a serious concern.
How to Combat This Drawback
Not all of Pennsylvania gets equally cold. Look at the winter temperature of different cities and opt for a city where the temperatures don’t drop as much. Furthermore, invest in good heating systems. If you live in a managed property, the snow shoveling won’t be your responsibility. And if you own a single-family home, there are always teenagers who shovel driveways for money.
Driving Can Be Hard
From traffic jams in cities to road signs being semi-reliable, driving in Pennsylvania can be a chore. As a retiree, you do not want to spend a lot of time stuck on the road or getting lost at intersections. That makes Pennsylvania hard to opt for those who are fond of easy commutes.
Inheritance Tax
One of the most rewarding parts of concluding one’s career is having significant savings to leave behind for those you love. When it comes to legacy and estate planning, an entire industry is built around helping the wealthy. And they all advise individuals of significant means to retire in states with no inheritance tax.
Unfortunately, Pennsylvania is not one of these states. While you may enjoy tax exemptions from your retirement income and 0% sales tax on a lot of transactions, those you leave behind would not be so happy seeing the government take up to 15% of your inheritance’s value. Before you get alarmed, the percentage of this tax varies according to your relationship with the person inheriting your assets.
- Spouses or direct heirs under (or at) 21 years old do not get charged an estate tax.
- Direct heirs (children or grandchildren) over the age of 21 will be taxed at 4.5% of the inheritance value.
- Anything you leave your siblings will be taxed at 12%.
- There is a 15% inheritance tax on everyone else.
How to Combat This Drawback
Learn more about the inheritance tax and optimize accordingly. There is little that can be done to avoid inheritance taxes except transferring wealth while you are alive. If you leave your wealth to a spouse, they will not have to pay an inheritance tax. They can also transfer wealth to their kids as a living citizen. There will be no taxes on this gift as long as it remains under the yearly (and lifetime) federal limits before the gift tax comes into play.
Who Should Retire in Pennsylvania?
As you may have noticed, whether a state is great for a retiree or a nightmare depends on the person retiring. The key question to ask when planning your retirement is who the state is good for. After all, the scenic outdoors won’t matter to the person who loves urban life.
And inheritance taxes won’t discourage someone who has already taken care of their children and leaves the inheritance to a charity. Let’s have a more in-depth look at the type of person who is the best fit for the Keystone state.
You Love to Be Active
If your dream of retiring is to lie on the beach and sip mojitos forever, the Pennsylvania state is not for you because of multiple reasons. Firstly, there is no beach in the state. Secondly, Pennsylvania’s attractions only count with those who want to remain active in retirement.
If you want to golf, go on hikes, make new friends, socialize with those around you, you will love the state. Major domestic tourist attractions generate significant excitement for the keystone state, and you will never have a dull moment in your retirement.
You Vibe With Your Age Group
If you get along with people your age, Pennsylvania is great for you because of the state’s laws, landscape, and culture that attract active retirees. That is why over 15% of the state’s population is older than 65 years of age. As mentioned above, the area is potent for being active with golf courses, mountains, and parks.
With zero sales tax on leisure, the most fun-loving active retirees from all over the east coast pour into the state. You will make a lot of friends have more than just memories to look back at.
You Have People Willing to Visit You (or People You Are Willing to Visit)
Are you the type of person who looks forward to thanksgiving because you enjoy the time you spend with your family? Do you ditch online screen time to go hang out with your friends? If you like being around your friends and family now, chances are you will continue to prefer this proximity even in your retirement. And if your friends and family are located in eastern states, Pennsylvania is a great retirement destination for you.
Pennsylvania is located near the east coast with transportation hubs that make for relatively short travel to New York, New Jersey, and even Washington DC. Your friends will be able to visit you every few weeks, and you will get to see your family often because Pennsylvania is one of the most accessible states on the East Coast.
You Love Community Life
Pennsylvania is mostly suburban, and most retirement homes and communities are based in rural regions. While this does decrease the hustle and bustle of urban life, everyone seems to know everyone else because of a strong community focus.
This may be appealing to you or a drawback from your perspective, depending on how introverted or extroverted you are. If your day to day leisure involves friends and family, then the chances are that you will enjoy the community-oriented lifestyle offered by Pennsylvania.
You Care About the Seasons
If you don’t mind having just winter and summer, most states would be fine for you. But Pennsylvania is especially attractive to those who appreciate the nuance of seasons.
Pennsylvania has four distinct seasons across the year. There is winter to enjoy snowfall in spring to witness the turn of climate in summer to soak the sun and fall to prepare for winter. Each season brings a different norm of delicacies, seasonal activities, and a general novelty in life.
You Love History, the Arts, or Domestic Tourism
Pennsylvania has an array of historical monuments for those interested, including the Liberty Bell. Furthermore, there are towns and parks of historical significance. With Pennsylvania’s museums, history meets the arts. And the arts have stayed alive and thrive in Philadelphia among other cities within the state.
So whether you love contemporary art or you enjoy witnessing the greatness of the past immortalized, Pennsylvania, presents you with plenty of opportunities to pass your time.
Of course, if the above is of no interest to you, the state’s art and history present neither an advantage nor a drawback.
You Love Sports
Being home to the little league world series and having four popular sports teams fills Pennsylvania with love for sports. If you love watching baseball and seeing week-long celebrations is of interest to you, you will definitely love being a Pennsylvania resident as a retiree.
You Care About Stretching the Dollar
As mentioned above, the taxes on retirees and the general flat-rate tax in Pennsylvania are among the lowest in the entire country. To some, the taxed amount makes little to no difference because of their income streams. But if you are retiring with only your pension income to rely on, Pennsylvania is one of the friendliest places for your wallet.
Who Should Not Retire in Pennsylvania?
Of course, with the question of who should retire in the keystone state comes the question of who should not. Below are a few descriptors that will let you know if Pennsylvania is not the right fit for you.
You Have Passive Income Coming From Assets Aside From Pension
Most Americans consider working until the retirement age and getting their pension checks from an IRA, a 401k, or social security. But for some, retirement is handing over their business to someone else and receiving passive income from properties they own or stocks they have bought.
Since your dividends and the income received as rent do not fall under the state’s tax-exempt income streams, Pennsylvania’s biggest draw does not hold much appeal to you. While the state income tax is low, there are states with zero income tax, and they would be a better fit for your retirement.
You Want to Retire in a Warm Place
Pennsylvania may be warm some of the time but gets extremely cold. If your retirement dream involves beaches, suntans, and pool parties, Pennsylvania is definitely not the state for your retirement. Not only is the state nowhere near a beach, but it receives snowfall, and shoveling driveways does not go hand-in-hand with sipping mojitos by the beach.
You Are Leaving Behind Significant Wealth for Your Heirs
While Pennsylvania will help you stretch the dollar as a middle-class or lower-income class retiree, chances are none of these benefits matter to you with the inheritance tax staring you in the face.
If you have significant wealth, the low cost of living is not a big plus. But to leave behind your inheritance in an estate where your friends will get taxed at 15% of what you leave them is not ideal. With only your spouse exempt from inheritance tax, you are left with no option but to either let the state take at least 4.5% of your wealth as it passes to your kids or ‘gift’ your inheritance as a living citizen (within the federal tax-exempt gifting limits).
However, if you plan to live off of pension and do not have children who will rely on your inheritance, this drawback does not count.
You Love Urban Life
Not everyone plans to retire in solitude. Some wish to retire with friends and have plenty of urban activities to do. If you plan to party well into your retirement years, Pennsylvania has little to offer. There is activity around sports and celebrations for respective teams.
But there is not a lot of urban activity around the state. And while there are some big cities in Pennsylvania, you can do better than Philadelphia if your ideal retirement lifestyle is based around an urban lifestyle.
You Want to Retire Early
A majority of the people wish to retire in their sixties. Pennsylvania’s retirement age is a minimum of 62 years, with general retirement hovering over 65 years. If you have made your money young and have enough to retire early, a low cost of living might entice you. But forget about the tax-exemption on retiree income.
Furthermore, chances are you are drawn towards an urban lifestyle, which, as mentioned above, is not Pennsylvania’s strongest suit. So find yourself a youth-friendly state with the right city life to make your early retirement fun and interesting.
Final Thoughts
The Keystone state is a great place with elements of natural beauty woven into the suburban buzz. To recap, here is a list of the pros of retiring in Pennsylvania:
- Low cost of living
- No taxes on retirement income
- Great Sales Tax with many exemptions
- Great healthcare
- Great outdoors and plenty to do
- Hand-cooked meals are available at convenience stores
- Great scenery, be it day or night
- Accessible to cities on the East Coast
And to recap the drawbacks, here are the cons of living in Pennsylvania:
- It gets extremely cold.
- Driving can be hard.
- There is an inheritance tax.
Sources
- PA: Get Ready to Retire
- Pennsylvania Vacations Guide: Pennsylvania Weather and Seasons
- PA: Tax Law: Policies & Bulletins
- Weather: Normal Snowfall in Central PA
- PA: Guide for Retiring Members
- PA: Retiring
- Acts Retirement: Is Pennsylvania a Good Place to Retire?
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