Figuring out where to retire can be exciting. Although it might also be a bit challenging. Where you decide to live has a major impact on your quality of life. Particularly when it comes to how long your savings will last. That’s why you want to examine what each state offers carefully. This allows you to choose the right option. If you are wondering how to retire well in Maryland. Here some critical points to consider.
Cost of Living
In most cases, retirees should take a close look at a state’s cost of living scores before choosing where to retire. They help you determine the overall affordability of a location by comparing it to the national average.
The scoring model is fairly simple. The national average is permanently set at 100. When a state’s score above 100. It means they are more expensive than average. When a score is below 100, it usually indicates that the area is more affordable.
Maryland’s overall cost of living score is quite high. Their cost of living score comes in at 128.1. Additionally, it’s category scores all sit above the 100-point mark.
For groceries, the score is 114.6. Utilities come in at 108.6, while transportation and healthcare sit at 110.1 and 122.6, respectively.
Housing is incredibly expensive in Maryland. The housing cost of living score is a shocking 180.2. Additionally, while the average home value in the nation is $262,604. The average home value in Maryland is $330,332. That’s a $67,728 difference.
That doesn’t mean that homes are generally nicer in Maryland. Instead, if you had two comparable properties, one located in the Old Line State and one in an area that aligns with the national average. The home just costs more in Maryland.
Tax Considerations
When you’re exploring retirement destination options. Don’t overlook local tax rates. How much you need to pay in taxes does impact your budget. As you’ll have to dedicate funds to handle that expense.
Maryland does have a state income tax. It uses a bracket-based system. Not unlike how federal taxes are calculated. Depending on your income level, you’ll owe 2 to 5.75 percent in taxes.
However, it doesn’t stop there. There are also county-level income taxes. They can push your tax bill even higher. How much you owe at that level also depends on your yearly income. Overall, they can range from 2.25 to 3.2 percent. That’s in addition to what you pay the state.
Now, there is some good news for seniors. The Old Line State doesn’t tax Social Security or Railroad Retirement income. Additionally, if some of your retirement income is from public pensions or IRAs. You can potentially qualify for a deduction that lowers your tax bill.
The deduction is worth up to $31,100, though you have to subtract how much you receive from Social Security from that amount. For example, if you receive $15,000 in Social Security, your deduction would become $16,100.
Non-public pensions are fully taxed. The same goes for non-Social Security retirement income above the deduction cutoff.
Maryland has a sales tax, as well. The base rate is 6 percent for most purchases, though there are some exceptions. For example, alcoholic beverages are taxed at a rate of 9 percent.
Overall, property tax rates in Maryland are near the national average. Additionally, there are some deductions, exemptions, or credits that can reduce the amount owed for seniors. For example, there’s a Homeowners’ Property Tax Credit Program.
There is also a mix of Senior Property Tax Credit programs, which may lessen your burden, too. Those involve a state credit and, potentially, a supplement from the county. Exactly how much they are worth can vary, so you’ll want to examine your unique situation to get a solid estimate.
Part-Time Job Opportunities
For some seniors, retirement doesn’t mean completely walking away from the workforce. Instead, it’s a time of transition, and many want a part-time job to be part of the equation. Not only can a part-time position keep them active, but it can also help them make their retirement savings last longer.
If you want to find a part-time job in Maryland, opportunities are usually easy enough to come by. However, COVID-19 has influenced overall availability and may continue to do so for some time.
Pre-COVID, the unemployment rate in the Old Line State was just 3.3 percent (as of March 2020), which was much lower than the national average of 4.4 percent.
When COVID struck, Maryland saw a smaller increase in the unemployment rate than many other areas, only hitting 10.1 percent in April 2020. That’s far below the national average at that time, which came in at 14.7 percent.
However, recovery hasn’t been as quick in the Old Line State. As of October 2020, the unemployment rate was around 7.8 percent. That’s only a 2.3 percentage point difference from its high point. When you compare that to the national average (6.9 percent) and its change rate (a decline of 7.8 percentage points), it appears that Maryland is lagging a bit.
That could mean that finding part-time job opportunities in Maryland may be more challenging, at least until COVID-19 is no longer relevant. As a result, retirees may want to ensure that they have enough in savings to carry them through even if they can’t find a position, just to be safe.
Retirement Apps you can use in Maryland
For seniors, retirement means having the right amount of savings. Here are some retirement apps that can help you do that. This table compares three of them and corresponding fees and what it is best for.
| App | Fees and Minimum | Best for: |
|---|---|---|
| Betterment | 0.25% per year no account minimum | Saving for retirement |
| Ellevest | $1-$9 per month no account minimum | Retirement especially for women |
| Personal Capital | Free | Planning retirement |
Best Cities for Retirees in Maryland
When you’re choosing a retirement destination, you have to look beyond the state. The city you select significantly impacts how you’ll spend your golden years, affecting your access to amenities, entertainment options, and more. Plus, each town may have a slightly different cost of living, so it’s important to take that into consideration as well.
If you aren’t sure where to begin, Bel Air can be an excellent choice for retirees heading to Maryland. It has a vibrant arts and entertainment district, as well as numerous retirement communities and medical facilities. Plus, the Saturday Farmers Market is often a favorite for retirees who like to eat fresh, locally grown food.
Chevy Chase is another city that should be on your shortlist. It essentially borders the District of Columbia (Washington DC), so you have easy access to everything the nation’s capability provides. Plus, its retiree population is high, so you’ll have an easier time meeting people who are also enjoying their golden years.
You may also want to consider Ocean City. While it’s mainly considered a resort town, it has a lot to offer seniors. The oceanside location means there’s lovely stretches or beach and bustling boardwalks to enjoy. Plus, there’s a slew of recreational opportunities beyond fun in the sand.
If you’re looking for a small-town feel and a town with historic charm, consider Cumberland. In comparison to many other cities, Cumberland is actually reasonably affordable. Plus, this town has a unique vibe, combining classic architecture, magnificent wineries, and unconventional art museums to create something all its own.
How Much Money You Need to Retire Well in Maryland
Maryland is one of the more expensive states to live in, both for working professionals and retirees. You’ll need more income here than if you chose to head to many other states. At times, this may even make Maryland an unsuitable destination for many retirees, particularly those with limited savings and a tight budget.
To put it simply, since Maryland’s cost of living is higher, it takes more money to retire comfortably there. Generally speaking, retirees may want to have access to $81,139 per year before heading to the Old Line State. That way, they can cover all of their needs and afford some wants, ensuring they can retire well in Maryland without any undue financial hardships negatively impacting their golden years.
Do you have any other tips on how to retire well in Maryland? Share your thoughts in the comments below.
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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