Choosing a place to retire can be an exciting time, but it’s also a serious undertaking. How far your money will go is impacted by a variety of factors, influencing how much it takes to retire well in a given area. Many soon-to-be retirees want to find an affordable location that offers the kinds of amenities they require. While they may spend time exploring traditional retirement states, many overlook amazing options like Iowa. The Hawkeye State has a ton to offer. Plus, your money can go further there, allowing you to retire well for less. If you want to see why Iowa should be on your list, then read on to learn how to retire well in Iowa.

Cost of Living

Each state has a cost of living score, comparing its affordability to the national average, which is set at an even 100. When a state has a score below 100, that means it’s cheaper to live there than the national average. Often, this means a retiree’s savings can go further or last longer there, something that may be critical if you have a tight budget.

Iowa’s overall cost of living score comes in at 91.4, which is significantly below the national average. However, Iowa really shines in when it comes to housing costs. For that segment, Iowa’s score is 76.0, marking it as one of the most affordable states for homebuyers.

In Iowa, the average home value is $154,727. In comparison, the national average sits at $248,857. That’s more than a $94,000 difference.

While some fear that the lower home value represents an issue with a property’s quality, that isn’t necessarily the case. At times, it simply means that the going rate for homes is lower overall, allowing you to secure a nice property for less than what a comparable house would cost in a different state that had a higher cost of living.

Iowa also does well in other sectors. It has a score of 96.3 for groceries and a 97.6 for transportation. For utilities, Iowa comes in as average, which a score of 100.0. The only area where Iowa is more expensive than average is healthcare, which landed at a 102.4. However, since it is more affordable in essentially every other sector, the slightly higher costs in the healthcare area have little impact on overall affordability.

Tax Considerations

Whether you’re working with a limited amount of retirement savings or have a significant sum set aside, tax rates matter. If you choose a state that has higher taxes, you’ll have to dedicate more of your retirement funds to cover those expenses. That means you’ll have less money available to support your preferred post-retirement lifestyle, and that isn’t always ideal, particularly if you have a tight budget.

In Iowa, there is a state income tax. However, you don’t have to pay taxes on your Social Security benefits. Military retirement is also tax-exempt.

Other types of retirement income are potentially taxed. Depending on your situation and filing status, you may be able to exclude up to $6,000 as an individual, or $12,000 if you’re married, of retirement income that comes from IRAs, annuity, pensions, or other plans. Generally, those who are at least 55 years old are eligible for some level of exclusion.

Beyond the exclusion, you do pay income taxes on your retirement income. Iowa has a bracket system. Income tax rates come in at 0.33 percent to 8.53 percent, so how much you pay varies depending on your income level.

Iowa also has a sales tax. The lowest rate, as set by the state, is 6 percent. However, each jurisdiction can charge an additional 1 percent, if they so choose. Overall, this rate is comparable to the rates set by most other states.

Individuals who are 65 or older are also eligible for a property tax credit. Usually, the Iowa Homestead Credit reduces the assessed value of the home (for tax purposes only) by about $4,850. This can result in a savings of $100 to $200 on your property tax bill, depending on your jurisdiction’s rate.

Part-Time Job Opportunities

Generally, retirees can find part-time jobs in Iowa with a reasonable amount of ease. Even in the wake of the pandemic, Iowa’s unemployment rate (as of July 2020) came in at 6.6 percent. That’s below the national average of 10.2 percent for the same period.

Before COVID-19, the unemployment rate was also below the national average. In February 2020, it was a startlingly low 2.8 percent.

However, that doesn’t mean the landscape isn’t more challenging today than it was previously. Additionally, until the COVID-19 event completely calms, the situation remains precarious. As a result, retirees today may have a harder time landing a part-time job, though that may subside down the line.

Best Cities for Retirees in Iowa

If you’re looking for a great city in Iowa to call home during your retirement, you have quite a few options. The town of Clear Lake is a popular choice, offering a small-town ambiance and welcoming vibe. Ames is another lovely choice. It’s conveniently located near Route 35, is highly affordable, provides a great feel, and it just 30 miles from Des Moines.

For retirees who want to be closer to a big city, Windsor Heights, a Des Moines suburb, is a solid choice. West Des Moines is a similarly excellent option.

It’s also wise to keep Mount Vernon, Clive, and Johnston on the table. They each have a great atmosphere, though each in a unique way.

How Much Money You Need to Retire Well in Iowa

Since the state has an affordable cost of living, you don’t need as much stashed away to retire well in Iowa. While the exact amount it takes to stay comfortable does vary depending on the city you select, if you have around $57,938 a year available, you should do well in Iowa. Covering your needs shouldn’t be an issue at that income level, and you can also get quite a few wants if you have access to that much cash.

Do you have any tips on how to retire well in Iowa? Share your thoughts in the comments below.

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