MARSHALL - Minnesota might be one of the healthiest and friendliest states to live in. It might have one of the top education systems in the United States. And it might lead the world in bike trails.
While there is obviously plenty for Minnesotans to appreciate, when it comes to anything taxes there are certainly better places to live and, apparently, retire.
So says Kiplinger, a Washington, D.C.-based publisher of business forecasts and personal finance advice, which says Minnesota is among the top 10 least tax-friendly states for retirees.
"We've been working on this project for the last four years and doing the ranking the past two years," said Rachel Sheedy, retirement editor at Kiplinger.
"We track and cover personal finance and retirement income taxes; as baby boomers get older they might be looking at where to get the best deal as they make their decision where to live. It's really a starting point to make sure people get all the breaks they can for retirement."
Sheedy said it's ultimately up to retirees to decide where they want to spend their post-work days, and the ranking doesn't take other factors like climate or crime rate into consideration. In that sense, the retirement taxes aspect is just one aspect people can consider when making plans on where to live.
"We look at some taxes that are more broad and would apply to anybody, but the main focus of the ranking was retirement income and how it's treated through taxes," said Sheedy.
Kiplinger analyzed state sales tax, income tax, Social Security and property tax for each state to determine its rankings. Property taxes have been on the rise in Minnesota in recent years as cities and counties are left dealing with a decrease on state aid at both levels. For retirees, the tax pill is even tougher to swallow, according to Kiplinger.
Minnesota, one of only 14 states that tax Social Security benefits, is also one of 22 states that impose its own estate or inheritance taxes. Also, Minnesota doesn't have retirement income exclusions for IRAs and 401k programs like some states do, Sheedy said.
"With Minnesota pensions, there are no tax breaks there," Sheedy said. "Plus, the income tax rates tend to be a bit high and sales tax is high as well. But the fact that retirement income gets taxed is one of the main factors in Minnesota making that list."
Kiplinger's three categories are "The Good," "The Bad" and "The Ugly." Other states besides Minnesota making "The Bad" list include California, Connecticut, Montana, Nebraska, New Jersey, New York, Oregon, Rhode Island and Vermont. California, New Jersey, New York, Oregon and Vermont also made "The Ugly" list, along with Iowa.
"The Good" list includes Alabama, Alaska, Delaware, Georgia, Louisiana, Massachusetts, Pennsylvania, South Carolina and Wyoming.