If you're nearing retirement or are considering relocating to a different state any time in the next several years, you need to do some careful thinking about how the recession and housing downturn have affected the finances of different states. The National Governors Association says it will take a decade for states to recover. Many states have had little choice but to raise taxes and fees in the teeth of the recession, and further increases are likely. Even so, public services will decrease, especially after one-time funds from the federal stimulus program stop flowing to the states.
These financial dilemmas will affect the quality of residents' lives, and could change your thinking about the place you'd like to spend your retirement years.
The Pew Center for the States recently released a study listing what it judged to be the country's 10 most imperiled states:
- Rhode Island
- New Jersey
California is the unfortunate poster child for states that have been effectively bankrupted during the past few years. Pew ranked all 50 states using six factors that it said had played major roles in California's spiraling financial decline: 1) high mortgage foreclosure rates; 2) worsening unemployment; 3) loss of state revenues; 4) the percentage size of the state's budget shortfall; 5) a legislative supermajority requirement that makes it hard to enact tax and budget cuts, and 6) a Pew ranking of how poorly each state managed its money. California had the high score of 30—a bad thing in this ranking—and scores in the other nine states ranged from 28 in Arizona down to 22 in Wisconsin. Pew noted, however, that many other states also were hurting and, in fact, the national average state score was 17.
[See Best Places to Retire.]
While Pew focused on the more troubled states, it's worth noting the 10 states that had the lowest, or best, scores on its ranking system:
- Wyoming (6)
- Iowa (7)
- Nebraska (7)
- Montana (9)
- North Dakota (9)
- Texas (9)
- Pennsylvania (11)
- Utah (11)
- South Dakota (12)
- West Virginia (12)
Of these states, Wyoming, Texas, and South Dakota have no state income tax. RetirementLiving.com has a detailed look at the various taxes levied by each state. To help provide a rough guide of how far your dollars will go in other places, SalaryExpert.com has a free set of city cost-of-living reports that include comparisons with other cities.
There are, of course, many other reasons why a location might or might not be attractive. But it can't hurt to see which places might be most friendly to your finances.