Nearly 54 million of the 71 million Americans who depend on Social Security benefits are 65 years of age or older. The average monthly payment for a retired worker as of June is $1,837; however, benefits are more like a lifeline than a paycheck for many.
42% of women and 37% of men in their older years depend on Social Security for at least half of their income. Out of every ten dollars received, at least nine are dependent on benefits for 12% of men and 15% of women.
However, they may have to settle for less in the future.
By 2034, the program’s funding trusts are expected to be completely depleted, allowing the SSA to pay out only 77% of scheduled benefits in about ten years. Congress will need to make changes to the program, such as raising taxes, raising the retirement age, reducing delayed retirement credits, or even reducing benefits, in order to avoid that outcome.
While Social Security is a federal program, where you live may have a significant impact on your benefits, even though your location is not a determining factor. These are the states most likely to weather a benefit cut with the least amount of hardship.
Winning Formula: UTAH, Alaska, and Texas
According to James Allen, CPA, founder of Billpin.com, and certified financial education instructor, people in Utah, Alaska, and Texas are best prepared to withstand future cuts to Social Security.
According to the U.S. According to the Census Bureau, these states have a younger demographic profile, with fewer people aged 67 and up. Bureau of Census,” Allen stated.
Actually, with 13.2%, 13.1%, and 11.7% of the population 65 and older, respectively, Texas, Alaska, and Utah rank as the three youngest states in the union, according to the Population Resource Bureau. In contrast, Maine and Florida, which are the oldest, both have over 21%.
According to the Social Security Administration, “they also have a lower percentage of their population receiving Social Security benefits,” Allen said. The worst part is that these states also have strong state-based assistance programs for the elderly. These states therefore have a safety net in place, even in the event that Uncle Sam tightens his purse strings. They seem to have constructed their own financial fortresses to withstand the impending Social Security deluge.
States with no Retirement Income
A few additional states provide an alternative form of protection by excluding retirement income from taxes, allowing you to retain a larger portion of your savings in the event that your Social Security benefits are reduced.
Illinois
The state income tax rate for residents of Illinois is 4.95%, but retirement income is completely exempt. Distributions from qualified employer-based plans (401(k)s and other) and self-directed plans (IRAs and IRAs converted to Roth IRAs) are tax-free for retirees in Illinois.
Additionally, the state does not interfere with U.S. retirement bonds, state and local government deferred compensation plans, or the federally taxed portion of Social Security benefits.
Iowa
Iowans who are 55 years of age or older will not be taxed on retirement income from 401(k), 403(b), and 457(b) plans as of 2023. The governor signed the law in 2022. It also exempts qualified annuity distributions, IRAs, Roth conversions, SEP, SIMPLE, and Keogh plans.
Mississippi
“Generally, retirement income, pensions, and annuities are not subject to Mississippi income tax if the recipient has met the retirement plan requirements,” states the Mississippi Department of Revenue. Early distributions are taxable and do not qualify as retirement income.
Pennsylvania
The Keystone State’s policy is less generous than the others because it does not exclude income from retirement annuities. The Pennsylvania Department of Revenue states that “Commonly recognized retirement benefits are not taxable for Pennsylvania purposes if you retired and met the requirements for retirement under your employer’s plan.”
The majority of states—38 total, plus D.C. —refrain from taxing Social Security by the state. However, nine more than double this by removing all state-taxed income in addition to Social Security and retirement accounts:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- The Wyoming
Three States with the Best Senior Benefits
Because of the extensive range of benefits that these states provide to senior citizens, SeniorStrong and SeniorAdvice concur that a small number of states are excellent choices for retirees on a tight budget, and many more will be if benefits are reduced.
Virginia: With a large network of hospitals and a high percentage of physicians who are registered with Medicare, the state is renowned for its top-notch healthcare options. It also stands out for having an abundance of home care and senior living options, low taxes, and a robust economy.
Hawaii: Despite the high cost of living, the average household income of Hawaii’s 65+ population is 33.8% higher than the US average. Healthcare expenses are also 11.4% less. It also provides tax exemptions for Social Security income and low property taxes.
Georgia: The state of Georgia is included in the list due to its senior-friendly policies, low taxes, and remarkably low healthcare costs.
