Selecting a destination for your retirement is serious business. The state you choose has a direct impact on your quality of life, as well as how long your retirement savings last. That’s why it’s so critical that you take a close look at your options. If you’re hoping to retire well in Massachusetts, here’s what you need to know about the pros and cons of retiring in the Bay State.
Cost of Living
Taking a close look at a state’s cost of living scores before you choose it as a retirement destination is, in a word, wise. Cost of living metrics help you assess a state’s affordability. With the national average set consistently at 100, you can identify more expensive states by any scores above that mark. When a state’s numbers are under 100, it signals affordability.
Massachusetts’s cost of living is quite high. The Bay State has an overall score of 130.1 and doesn’t have a single category score below 100 either.
In the grocery category, Massachusetts comes in at 115.3. For utilities and transportations, the scores are 105.5 and 109.0, respectively.
Healthcare is one of the most expensive categories compared to the national, coming in with a score of 126.6. However, for housing, the Bay State scores at startling 169.6.
The high housing score is augmented by the average home values. While the national average is $266,222, Massachusetts comes in at $469,621. That’s a difference of $203,399.
Tax Considerations
Massachusetts does have a state income tax rate. The Bay State levies a flat 5 percent tax on most forms of income. However, Social Security is exempt, as well as income from many public pensions. Additionally, there are several other tax breaks available to many seniors.
For example, seniors may be eligible for a deduction based on their property taxes called the Circuit Breaker Tax Credit. If you’re at least 65, you can also qualify for a $700 exemption. There are also additional medical and dental exemptions.
However, income from IRAs, 401(k)s, and other retirement savings accounts is taxable. The same goes for non-public pensions.
When it comes to sales tax, Massachusetts has a flat rate across the state. It’s set at 6.25 percent and applies to most typical purchases.
Massachusetts property tax rates are generally reasonable. However, based on the average home values in the area, even a low rate adds up fast. Cities and towns may offer property tax exemptions to seniors, helping to lower the financial impact of owning property. Plus, as mentioned above, the Circuit Breaker Tax Credit helps offset some of the burden.
Part-Time Job Opportunities
Since many retirees plan on supplementing their retirement income with a part-time job, understanding the unemployment rate in Massachusetts is wise. It lets you estimate how challenging finding a position may be, allowing you to plan properly.
Like many parts of the country, Massachusetts experienced skyrocketing unemployment during COVID-19. In June 2020, the state peaked with a rate of 17.7 percent, a figure that was far higher than the national average’s peak of 14.8 percent, which occurred in April 2020.
While the situation is improving, the Bay State still has higher than average unemployment. As of December 2020, the rate was 7.4 percent. In comparison, the national average during that month was 6.3 percent.
Ultimately, finding a part-time job may be a bit more difficult in Massachusetts for a little while. Recovery takes time, and the Bay State is lagging a bit behind. However, before the pandemic, Massachusetts had lower than average unemployment, so it is possible that the situation will turn around.
Still, it’s wise not to assume that a part-time job will be immediately available. Retirees should ensure they have enough savings to initially handle their needs. That way, if it takes time to nail down employment, they’ll be financially secure.
Best Cities for Retirees in Massachusetts
Along with exploring what a state has to offer, you also want to take care when choosing a city to call home. Each city is unique, offering different costs of living, access to amenities, and entertainment options.
When it comes to affordability, Lawrence, Brockton, or Lowell a great choices if you want to be near Boston. Each qualify as one the most affordable suburbs in the area, allowing your savings to go further. Plus, you’ll be in close proximity to Boston and all of its amenities.
If you’re looking more in the Concord area, then consider Chelmsford. Real estate is cheaper in Chelmsford, which makes it easier for you to buy a homeowner during retirement. Plus, the town has a lot of charm and offers plenty when it comes to amenities.
Braintree can be another excellent choice. It’s near the South Shore and Blue Hills Reservation, is reasonably close to Boston, and has a vibrant small-town feel. Plus, while real estate is more expensive than the national average, it’s far below what you find in many major Massachusetts cities.
You may also want to put Pittsfield on the table. Again, it’s a more affordable option in comparison to the state averages, including when it comes to housing. There are also ample opportunities for outdoor activities like fishing, skiing, and hiking. Plus, it is close to several art museums and even an orchestra hall, making it a great choice for anyone interested in a lively arts scene.
How Much Money You Need to Retire Well in Massachusetts?
As a state with a higher cost of living, it does take more money to retire well in Massachusetts than it may cost in certain other areas. As a result, the Bay State may only be a solid option for retirees with a substantial amount of savings or who are willing to work to supplement their retirement income.
Generally speaking, if you have access to $82,217 a year, you should be able to have a reasonably comfortable retirement in Massachusetts. Handling your needs likely wouldn’t be a challenge, and you’ll be able to shoulder many wants, too.
Do you have any other tips that can help someone retire well in Massachusetts? 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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