When people picture retirement, Minnesota might not initially come to mind. However, the North Star State does have a lot to offer. This includes everything from vibrant cities to quaint country towns. Plus, lakeside living can be very accessible here. Which could be the dream for some seniors. If you want to make sure that you could thrive in the North Star State after leaving the workforce. Here’s what you need to know to retire well in Minnesota.
Cost of Living
Before you settle on a place to retire, it’s wise to examine the state’s cost of living scores. Generally, these metrics let you know how affordable or expensive an area is in comparison to the national average, a critical insight that may make certain states more or less viable.
Comparing cost of living scores is simple. The national average is permanently set at 100. If a score is higher than that, it means the state costs more than average. Scores below 100 indicate the state is less expensive.
Overall, Minnesota’s cost of living score is 101.2, placing the state near the national average. However, the category scores bounce above and below the line, at times, substantially.
While transportation is also near the national average, coming in at 100.6, healthcare is a startling 111.6. Utilities come in just a tad below the national average, sitting at 98.7, while groceries are above with a score of 105.5.
When it comes to housing, Minnesota is actually fairly affordable. The housing score is 89.2, which is a bit below the national average.
For housing values, The North Star State is a little above average. While Minnesota comes in at $274,571, the national average is $262,604. While this may seem to contradict the housing cost of living score, it’s important to note that the category includes more than home values. For example, maintenance, repair, insurance, and similar expenses are factored into the housing score, and that can cause what looks like a discrepancy.
Tax Considerations[embedded content]
If you’re trying to estimate how far your retirement savings will go, you need to look at tax rates for the destinations you’re considering. How much you have to pay in taxes matters, dramatically impacting how much of your income is going toward unavoidable costs. Whether your budget is tight or ample, understanding your tax obligations is a must.
In Minnesota, you will find a state income tax. The North Star State uses an approach that’s similar to federal taxes as it features a series of brackets. Depending on your income level, your rate could vary from 5.35 to 9.85 percent.
Social Security is at least partially – if not wholly – exempt from state-level taxation in Minnesota. How much is taxed depends on your overall income level, though those in the highest income brackets may owe taxes on up to 85 percent of their Social Security income.
All other forms of retirement income are also taxed. This includes funds from 401(k) and IRA plans, which are taxed in-full.
The North Star State also has a sales tax. At the state level, the rate is 6.875 percent. However, counties and cities can add additional taxes, pushing the local rate up higher.
When it comes to property taxes, Minnesota’s rates are near the national average. But the state does offer a Senior Citizens Property Tax Deferral program that may reduce the burden for many retirees. If your annual income doesn’t exceed $60,000, your property taxes will never exceed 3 percent of your household’s income, regardless of the value of your property.
Part-Time Job Opportunities
Many seniors don’t leave the workforce entirely when they retire. Instead, they pick up a part-time job, allowing them to have a small source of income to supplement their retirement savings.
In Minnesota, part-time jobs are typically available. In March 2020, before the COVID-19 pandemic significantly altered the landscape, unemployment in The North Star State was only 2.9 percent, far below the national average of 4.4 percent. Even in May 2020, when the coronavirus devastated the area, Minnesota’s unemployment rate was only 9.9 percent, a full 3.4 percentage points than the national average at that time, which came in at 13.3 percent.
The North Star State has also been reasonably quick to recover. In October 2020, unemployment was back down to 4.6 percent. That’s far below the national average during that month, which sat at 6.9 percent.
While there is certainly some uncertainty, part-time jobs should be reasonably available in Minnesota. However, the situation could change. Additionally, smaller towns tend to have fewer options when it comes to employment, so the city you choose will play a role, too. As a result, it’s wise to keep an eye on local conditions, ensuring you can settle down in an area that will meet your work-related needs.
Best Cities for Retirees in Minnesota[embedded content]
When you’re deciding exactly where to retire, you need to look beyond the state. Each city will bring something different to the table, including when it comes to amenities, cost of living, and overall vibe. That’s why you need to consider your unique needs and find a city that matches, ensuring your retirement will be exactly what you pictured.
If you’re looking for a big city, Minneapolis is a strong contender. It’s fairly affordable when compared to other cities of a similar size and offers an excellent quality of life. You’ll find a thriving arts scene, numerous golf courses, and quick access to outdoor activities. Plus, healthcare services are highly accessible, which is convenient.
For retirees who prefer a small-town feel, Virginia could be a better choice. It’s brimming with amenities and offers a great cost of living, as well as beautiful outdoor areas that are begging to be explored.
Albert Lea is also a solid choice. You can experience lakeside living for less, as well as quick access to Myer Big Island State Park.
For something a bit quirky, consider Austin. It’s the home of the Spam Museum, along with other venues that give the area a unique culture. Plus, the community maintains a slightly rural, small-town vibe, making it comfortable.
How Much Money You Need to Retire Well in Minnesota
With Minnesota’s reasonable cost of living, many seniors can retire comfortably there with a moderate amount of savings available. While you might want to bypass high-cost cities if your budget is on the tighter side, you do still have plenty of exceptional options available.
Generally, if you can access $64,151 a year in retirement income, your odds of retiring well in Minnesota are fairly high. Covering your needs should be pretty simple, and you’ll be able to handle many of your wants, too. Ultimately, that can make your golden years pleasant, ensuring you can enjoy your time away from the workforce.
Do you have any tips that could help someone retire well in Minnesota? Share your thoughts in the comments below.
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