How far would you go to avoid paying taxes? That’s a tricky, but not a trick, question.
Taxes are a problem for many of us, but they seem to be a bigger issue as people get older and their income — in retirement — often declines.
A well-known Washington-area financial planner, who asked not to be identified, says, “It seems that as people get older they become more fixated on reducing, or avoiding, taxes. This is especially true for men.”
His client base is composed mostly of active-duty federal workers and retirees.
“I tell them pay the taxes,” he said. “That’s a sign they have income … but that doesn’t please a lot of them.” he said.
I have an old friend who retired some years back. He was with the General Services Administration and he and his wife would, and do, have a good retirement income. But, he wanted more, as in less taxes. His solution:
Although born in the Midwest, and a longtime resident of the Washington area, he decided to retire clear across the country: Washington state. This, despite the fact that he had no friends or relatives in the Northwest, and he wasn’t a hiker, biker or camper. He caught his fish at the supermarket. So why did he move to the banks of the Columbia River? Taxes.
As he explained it, Washington had no state income tax and Oregon, right across the bridge, had no sales tax. His plan was to be a resident of Washington but shop in Portland. It worked for a while. Now he is a resident in an assisted living facility.
A well-known Washington-area financial writer retired and decided to move to Florida. For tax purposes. But he found out that his auto insurance would be higher there (believe it or not) than here. Bottom line: He lives here, which is also where most of his family is.
The decision as to where to live is important. But many pros say that taxes shouldn’t be the deciding factor. Living costs, the quality of life, and access to good medical services are most important. That said, we’ve had a number of requests from people who would like a tax road map of the United States.
So here’s a list of states that exempt civil service annuities from state taxes: Alabama, Illinois, Hawaii, Kansas, Louisiana, Michigan, Pennsylvania and New York. A few other states, such as Kentucky, Massachusetts, North Carolina, Wisconsin and Oregon exempt part of the annuity from state taxes.
There are a few states with no personal income taxes. They include Alaska, Nevada, South Dakota, Texas, Washington and Wyoming. Nevada and Washington have had an influx of retirees escaping high taxes in California. Other states have no personal income tax but do tax certain types of income. They include Florida, New Hampshire and Tennessee.
The best source for current information on the state-by-state tax situation for retirees is the National Active and Retired Federal Employees organization. NARFE is based in Alexandria and its Web site is www.narfe.org.
Help With Hearing Aids
As Americans age, many of them suffer from hearing loss. It can be a permanently isolating experience and cause personality changes in some people. Hearing impairment is also a problem with many newborns and children. Treatment is expensive. And the new state-of-the-art hearing devices, while tiny and wonderful, can be expensive.
That’s why the Office of Personnel Management has told health plans in the federal health program (FEHBP) to listen up. It wants them to come up with new ideas, and improved benefits where possible. Right away. OPM has asked for ideas and plans by August.
The FEHBP covers nearly 9 million people, the vast majority of whom are not federal workers or retirees. In addition to several million active-duty federal people, the program covers retirees, spouses, survivors, dependent children (up to age 22) and in many cases even ex-spouses and grandchildren.
The FEHBP program is the largest company-backed plan in the nation. It also covers most members of the House and Senate. Sens. Hillary Rodham Clinton and Barack Obama have both suggested the FEHBP as a model for a national health insurance plan. Many private plans watch the FEHBP to see what it is doing. If it is successful in getting improved hearing benefits — either as part of regular policies or in optional coverage — that will jump-start many private plans to do the same thing.
• Mike Causey, senior editor at Federal News Radio AM 1050, can be reached at 202/895-5132 or mcausey@federalnews radio.com.
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