What are the Pros and Cons of Maryland Retirement? (townhome, school)

[BabyJuly]

Retire in Maryland?

Pro
Maryland does not tax social security income
Close access to 3 airports
Access to amenities of Washington DC

Con
Maryland taxes retirement distributions (like Traditional IRA) and pension income at 5.75%
High local taxes
High property taxes

What else can you think of, trying to justify retirement in place versus moving.

[North Beach Person]

Originally Posted by BabyJuly

Retire in Maryland?

Pro
Maryland does not tax social security income
Close access to 3 airports
Access to amenities of Washington DC

Con
Maryland taxes retirement distributions (like Traditional IRA) and pension income at 5.75%
High local taxes
High property taxes

What else can you think of, trying to justify retirement in place versus moving.

The reason property taxes seem high is because your house is expensive. Having said that, PA is noted to be more retiree friendly than MD but certain areas of it can make your MD property taxes look like chump change.


Your income tax number did not take into account the County piggyback income tax, typically 2.8% on top of the 5.75%.


Unless you fly a lot access to 3 airports is nonessential. What amenities in DC?

[htownterp]

The PA school tax is no joke!

[bufflove]

Originally Posted by BabyJuly

Maryland taxes retirement distributions (like Traditional IRA) and pension income at 5.75%

Wait, what? Is this true generally or are you just in the top income bracket ($250K individual; $300K+ jointly), i.e. it's treated as ordinary income?

[North Beach Person]

Originally Posted by bufflove

Wait, what? Is this true generally or are you just in the top income bracket ($250K individual; $300K+ jointly), i.e. it's treated as ordinary income?

Pension is ordinary income, taxed at whatever rate is appropriate for the amount. As you know the MD personal income tax is progressive and increases as income does. Then the County piggyback income tax is on top of that, most Counties are around 50% of the state percentage. So I'm around the 8% combined tax rate on my pension. I have just under 28% withheld for federal and state income tax. I still had to pay last year on my federal return due to my pension income triggering income tax payments on my Social Security.

[elizabeth224]

Very true about property taxes. It depends on where you live in MD. We have been on the cusp of moving but you have to weigh options. For us, having airport options, shopping, restaurants and especially health care is important. We wish MD offered a similar deduction for private IRA and pension withdrawals. Most states do.

We found the beach area of Delaware is cost effective with taxes but is associated with other fees and lacks an airport and choice of medical options. However, they are constantly building and not really taking care of the infrastructure in the area.
Virginia offers lower property taxes but again taxes food and has a personal property tax.

Maryland really shows no effort to retain their retirees (which is a shame) but in the end I guess you have to decide where you will be the happiest. They also have an Estate and Death tax.

[Digger 68]

Originally Posted by elizabeth224

Very true about property taxes. It depends on where you live in MD. We have been on the cusp of moving but you have to weigh options. For us, having airport options, shopping, restaurants and especially health care is important. We wish MD offered a similar deduction for private IRA and pension withdrawals. Most states do.

We found the beach area of Delaware is cost effective with taxes but is associated with other fees and lacks an airport and choice of medical options. However, they are constantly building and not really taking care of the infrastructure in the area.
Virginia offers lower property taxes but again taxes food and has a personal property tax.

Maryland really shows no effort to retain their retirees (which is a shame) but in the end I guess you have to decide were you will be the happiest. They also have an Estate and Death tax.

Big, you wouldn't want to be to remote, and in bumpkin land where you wouldn't get potentially high quality care.

I posted this in another thread but the rates of men having their prostate removed do to prostate cancer as opposed to being treated were much higher in more rural states that lacked the quality care that you would get here.

(Anybody can screw anything up anywhere so those comments need not be added. I could type another paragraph about that and a well known local hospital)

[tarheel_indc]

Some extra info I didn't see so far:

1. The Maryland Comptroller website says there is a maximum pension exclusion of $29,900 for people over age 65. A married couple may each be eligible for the exclusion. 401k distributions qualify.

2. The amount exempt from Maryland estate tax will increase to $5 million in 2019. There is an inheritance tax of 10%, but close relatives (spouse, children, siblings) are exempt.

I am not a tax professional - this is all information I have read online.

[elizabeth224]

Tarheel, I'm not the one to properly explain this exemption because it's pretty involved.

Before we retired we thought it was a clear cut exemption as in other states. For us, the issue is the fact that IRA withdrawals and private pensions are excluded. The $29,900 is also confusing (at least for us). We left it up to our CPA but it has something to do with SS benefits. It resulted in a very small deduction for us.

Where you live in retirement is such a personal decision. What's important to one person might not be to another. It has been very interesting to us to see how different states handle different retirement and tax issues.

[BabyJuly]

Montgomery County, Townhome worth 400K, 12% federal tax bracket
At one time I was in the highest tax bracket.

Amenties of DC?--Its a major destination location with museums, concerts, events, etc. Lots for active retirees to choose from.
I understood 5.75% is the state income tax rate.