June 20, 2021 — Virginia’s recent Comment to our “25 Most Popular Active Communities in the Southeast” article really got things going. Many folks jumped in to help answer her question, which asked what people thought about retiring in Maryland. Since hers generated so many other Comments (and Maryland is not an active community nor is it in the Southeast) we thought we would pull everything together under a new post to keep everything in better focus.
Most of the Comments quickly got into taxes and cost of living, although just about everyone liked other aspects of the Free State. Regarding taxes, an estate lawyer once said something very wise to my mother and I. He said: “Don’t let the tax tail wag the dog”. In other words, if you want to do something for good reasons (like move to another state), do it. His mantra – enjoy your life; fear of taxes is not the way to live. Just as important as that thought though, you also have to act on the basis of the facts, not on what you think you know or heard from someone else.
Figuring out state taxes is not easy. Most states have a bewildering array of taxes and exemptions. The average person can get a sense of how they will be affected, but to really know the impact of state taxation on your situation is to have to have a professional develop a test return. Only then will you really know. And, if you really want to retire somewhere because of a good reason (you love the town, your grandchildren live there, or you can pursue your favorite activities there), are you really going to turn down a happy life because you don’t want to pay some taxes?
A Maryland mini-retirement Guide
As a starting place, we recommend that if you are considering a state for retirement you use our Mini-Retirement Guides. They are brief, but they provide a good overview of each State. You will learn what the attractions are, cost of living, and tax situation for retirees. There are facts about sales taxes, income tax brackets, property tax exemptions, and tax treatment of retirement income like Social Security. By no means are they exhaustive, but they provide a good overview to get you started. You can find all of them in the State Mini-Guides in our top navigation.
Maryland’s Mini-Guide is a good example. It will tell you that the minimum tax bracket is only 2%, but rises quickly until it is to 5.75% on incomes over $250,000. The State has both an inheritance and an estate tax, the only state to have both. The sales tax is 6%, but unlike many states, local authorities cannot levy a tax on top of that. Retirement income is one of the more confusing and misunderstood aspects of the State’s taxation policies. Military pensions are not taxed. Social Security income is not taxed. Effective in 2021 there is a $34,300 per person retirement income exclusion for people who are over 65 or totally disabled, but that is reduced by any Social Security income. In an unusual wrinkle, 401(k) type income can be excluded, but not IRAs. Other exemptions exist for certain types of state workers (emergency, corrections, law enforcement, fire). Maryland is one of the more expensive places to retire. The Zillow Home Value Index for the State was $362,347 in mid 2021, about $80,000 higher than the U.S. Index.
So what is great about Maryland?
Quite a bit, actually. The State has a long waterfront on the Chesapeake, the Atlantic, and many rivers. For boaters and people who want to be on or near the water, it can be a great choice. The interior portion offers a very different feel as it reaches into the Appalachian foothills. There are old towns like Chestertown and Annapolis, new planned communities like National Harbor, and many other interesting places to retire, like Solomons Island. The State is definitely worth considering as a place to retire.
There are so many great places to retire in the U.S. and abroad. Explore the ones you are interested in. But make sure that you have the facts before you rule any out. And please, offer your Comments and thoughts about this state and any others so our Members and visitors get the benefit of your experience!
We have moved the Comments made about Maryland from the “21 Most Popular Active Southeast Communities” here. Not all of them are accurate, but they are interesting!
Original Comment: Is Maryland the forgotten state for retirement? Does anyone reading this live there? Any suggestions for areas to check out? I have read some older posts but they don’t discuss much – Virginia
Maryland is under-rated for retirement in my book. The winter climate is a little milder than in the Northeast for one thing (although technically not in the Southeast like the other communities listed here). It offers a combination of many waterfront towns (Annapolis, Ocean City, Leonardtown, Solomons Island) charming older ones (Chestertown, Hagerstown), and new planned communities like National Harbor and Columbia. Many of those places have active communities to choose from. – John
— Many people leave Washington, DC every weekend for their homes in Easton, Maryland. It has been described as the Hamptons of Maryland. Lots of homes on the bay, a charming town with lots of unique shops and close proximity to the beaches. It is located on the eastern side of the bay bridge and then south towards St. Michaels, MD. My husband and I owned a weekend condo in Solomon’s Island, Maryland for a few years since we did not have to cross the very busy bay bridge to get there. I found it a bit slow at the time however, things have changed and it is busier with more activities than in the past. Maryland as a whole is an expensive place to retire. – Jennifer
We lived in Maryland for nearly twenty years. It definitely has seasons. Hot and humid in the summer, mild winters (icy roads!!). Most retirees end up near the coast. It is expensive to live there and the taxes are high. Annapolis and the area around DC are very expensive. The “Eastern Shore” is popular with retirees, but that can also be pricy. Baltimore and the surrounding areas are less expensive, but it has had issues with crime and deteriorating infrastructure. Driving around DC is a nightmare. I still don’t think that I have recovered from my years of commuting. – LynnB
I use to live in Md for over 35 yrs and my wife is from there. We had to move because the cost of living is too expensive to live there after retirement. It’s not that we didn’t make a good retirement income, but why pay it out in a state that doesn’t have what other states have and it’s a lot cheaper to live. Many people I know are leaving Md. No tax breaks for retires. – Richard
It pays to do some good research on state income taxes in states being considered for retirement. You might think a state is a “high tax state” for income taxes, but that may not necessarily be true for seniors. For example, one commenter here said Maryland has no tax breaks for retirees. That’s not the case. Maryland doesn’t tax Social Security income, for example. That’s a pretty good tax break for most seniors. Most retirement websites I’ve looked at say Connecticut, where we live part of the year, taxes Social Security. Actually, that’s basically wrong. For several years Connecticut has not taxed Social Security up to a certain income. If you’re a married couple making up to $100,000, you’re not taxed on Social Security in CT. Again, a pretty good tax break, but most people wouldn’t know that because some sites simply say “CT taxes SS.” True, but only if you’re receiving a fairly high income. Smartasset.com has good state income tax calculators for people who receive Social Security. Due diligence in looking at state tax liability for seniors is definitely important. – Clyde
Totally agree with LynnB and Richard – Maryland is very expensive and NO retiree breaks. Really sad!!- Sharryn
We love the areas around Chestertown and Easton and often make the easy trip down from PA. Would love to retire there, but pensions and investment and retirement income is taxed, so sadly its a big NO for us. – Staci
Maryland has a State Income tax. It doesn’t tax social security but taxes pension income. In addition to the State Income tax, there are also local taxes to pay. – LynnB
I think we should have called this post something like “Is Maryland a Good Place to Retire”. The State is taking a beating from many commentators. Yes, it is one of the more expensive states. But actually, it seems like the bad press is overrated. It does offer some exemptions ($33,100 per person), although Social Security is deducted from that. My point is, before you dismiss a state for tax reasons it is important to carefully look at how the state would affect you taxes. The best way to do that is to ask an accountant to examine how you would be affected if you move there. But as we always say, retire where you want to live, not just tax reasons. See https://www.marylandtaxes.gov/forms/20_forms/Resident_Booklet.pdf and https://www.topretirements.com/state/maryland.html – Admin
MD is way too expensive for retirement. No tax breaks and the traffic is miserable! As a matter of fact, my moving truck comes Monday. My house in MD is sold and my new home is in VA. I know Governor Hogan tried to get the terrible tax rules changed, but as of now they are still very unfriendly to retirees. — DaveC
This is to Dave C and anyone else in VA or headed there. I am from VA, want to go back for final retirement. Would you be kind enough to tell me where you picked and why? I am open to most of the state but do have a few favorites. Just want to educate myself as much as possible with real life examples. I appreciate your response, if you are so inclined. – Sally
Below is a personal tax tips summary sheet on state taxes for seniors in Maryland. It’s from the state government. Among other things, some pension income is not taxed.
https://www.marylandtaxes.gov/forms/Personal_Tax_Tips/tip51.pdf – Clyde
That’s it – can’t wait to see your Comments!