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Is Retirement in a Lower-Tax State Actually More Affordable for HP Employees?

HP employees weighing a move to a no-income-tax state should consider the full financial picture beyond tax headlines, as higher housing, insurance, and property expenses can quickly offset perceived savings. – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.

For HP employees considering retirement relocation, the key takeaway is that lower income taxes don't always translate into lower living costs—comprehensive financial planning is vital to avoid unexpected burdens. – Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

The financial considerations of relocating to a no-income-tax state during retirement.
How property taxes, housing costs, and insurance can offset tax savings.
The importance of strategic tax and estate planning before making a move.

The Financial Considerations of Relocating to a No-Income-Tax State

Retiring in a state without income tax is often viewed as financially advantageous. However, for HP employees planning their next chapter, it's essential to consider the overall cost of living. While the absence of state income tax is appealing, other expenses such as housing, insurance, and maintenance can significantly impact your budget.

In 2024, a couple in their mid-sixties moved from Indianapolis to St. Petersburg, Florida, to be closer to their adult children. Florida's lack of state income tax was a major draw. However, after relocating, they encountered high insurance premiums, elevated home prices, and unexpected repair costs following Hurricane Helene. Brad Clark, founder of Solomon Financial in Carmel, Indiana, noted that the husband had to return to work, altering their retirement plans considerably.

They were in a pretty good position up here, and now it's just not a pretty picture, said Clark. This example serves as a reminder that working longer may become necessary if key relocation costs are not thoroughly evaluated.

Beyond Just Income Taxes

The significance of income taxes in retirement largely depends on the size and type of income streams. HP retirees with substantial investment income might find benefits in no-income-tax states, but middle-income households often discover that income taxes play a smaller role than anticipated. Jared Walczak from the Tax Foundation emphasizes that sales and property taxes often take center stage in these states.

For instance, Tennessee has no income tax but has a combined state and local sales tax rate of 9.55%, the second-highest in the nation.

Property taxes are another critical factor. Texas, a popular retirement destination, has an average property tax rate of 1.60%, more than double Florida's 0.80%. This can be an unexpected expense for retirees transitioning into a fixed income.

Financial planner Caitlin Frederick of Ullman Wealth Partners in Florida advises that new homeowners may face higher tax bills than expected. Long-term residents benefit from property tax caps, but these reset when homes are sold, and the reassessment may not occur until the second tax cycle. Relying solely on online listings for tax estimates can be misleading; consulting with agents and planners can provide clarity on potential increases.

Hidden Costs of Housing and Insurance

Housing affordability is just one aspect of the retirement equation. According to Bankrate, shelter costs can easily offset any income tax savings.

This is especially true in states prone to severe weather. Florida has experienced rising insurance costs due to hurricanes and climate-related threats. For example, a Michigan couple who relocated to Sarasota found themselves paying $35,000 annually in homeowners insurance, HOA dues, and property taxes.

Nationally, Bankrate reports the average annual premium for a $300,000 policy is $2,267. In Florida, it's more than double at $5,527, second only to Nebraska. These increased costs can greatly impact retirement budgets, particularly for HP employees accustomed to more stable expenses.

Planning for Taxes and Estates

Many of these challenges can be addressed through careful financial planning before relocating. Strategies such as converting traditional retirement accounts into Roth IRAs can help manage taxable income and control state tax exposure in retirement. For HP employees, timing and proactive tax planning can be instrumental in maintaining income levels.

Each state taxes retirement income differently. Some, like Illinois, exempt income from 401(k)s, IRAs, and pensions. Others, such as Colorado and New Mexico, impose taxes on Social Security for higher earners. Understanding how your benefits are treated at the state level is crucial before choosing a destination.

Tools from the Tax Foundation and Bankrate can assist in comparing taxes, housing, health care, and other costs across states. These calculators provide HP employees with side-by-side insights into how far their income may extend in different regions.

Estate and inheritance taxes are additional considerations. Tony Owens from AlphaCore notes that while federal inheritance tax applies only to estates above approximately $14 million, many states have much lower thresholds. In Oregon, for example, any estate above $1 million can be taxed. HP retirees intending to leave assets to family should account for these potential state-level obligations.

Owens also points out that even California's 13.3% top income tax rate doesn't always make other states a financial advantage. HP retirees might not experience significant relief unless they are in the highest tax bracket. Understanding how each state handles marginal tax rates is essential to making an informed decision.

Bottom Line for HP Employees

Assuming that moving to a state with no income tax will result in savings can be misleading. While taxes may be lower, costs such as housing, insurance, and property taxes often increase simultaneously—and may even surpass the savings.

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Sources:

1. Carlson, Debbie. “Retirees Who Move to Lower-Tax States May Not Save as Much as They Think.” The Wall Street Journal , 9 Apr. 2025, www.wsj.com .

2. Costa, Moriah. “6 Important Costs to Consider When Planning for Retirement.” Synchrony Bank , 20 Feb. 2024, www.synchrony.com .

3. “Financial Fact vs Fiction: This Roth Conversion Myth Could Cost You.” Kiplinger , 6 Apr. 2025, www.kiplinger.com .

4. “Skyrocketing Housing Costs Pose Major Threat to Retirees.” TheStreet , Jan. 2025, www.thestreet.com .

5. Parkshore Wealth Management. “Tax Considerations When Downsizing or Relocating in Retirement.” Parkshore Wealth , Sept. 2024, www.parkshorewealth.com

How does HP Inc. ensure that the pension plan benefits will remain stable and secure for employees in the future, and what measures are being implemented to mitigate financial volatility associated with these benefits? Employees of HP Inc. should be particularly aware of how the transition of their pension payments to Prudential will affect their financial security and what protections are in place to ensure that these payments are maintained without disruption.

HP Inc. ensures pension plan benefits remain stable and secure by transferring the payment obligations to Prudential, a highly-rated insurance company selected through a careful review by an Independent Fiduciary. This move is aimed at reducing financial volatility associated with HP's pension obligations while maintaining the same benefit amount for retirees. Prudential's established financial stability provides additional security to employees(HP Inc_November 1 2021_…).

What specific details can HP Inc. employees expect to learn in the Welcome Kit from Prudential, and how will these details help them understand their new payment system? HP Inc. pension participants will need to familiarize themselves with the information outlined in the Welcome Kit to make informed decisions regarding their pension benefits going forward.

The Welcome Kit from Prudential will provide HP Inc. employees with instructions to set up an online account, along with details on managing payments, tax withholdings, and other resources. This information will allow employees to familiarize themselves with Prudential’s system and ensure a seamless transition without disruptions(HP Inc_November 1 2021_…).

In what ways does the selection process for Prudential as the insurance provider reflect the commitment of HP Inc. to the well-being of its employees? Understanding the rationale behind this decision will give HP Inc. employees insights into the fiduciary responsibilities and governance processes that protect their retirement benefits.

The selection of Prudential reflects HP Inc.'s commitment to employee well-being, as it involved the Independent Fiduciary conducting an extensive review of insurance providers. Prudential was chosen based on its financial strength and ability to manage pension payments securely, showing HP's focus on protecting retirement benefits(HP Inc_November 1 2021_…).

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The annuity payments from Prudential will be taxed similarly to the previous pension payments, though employees will receive two separate 1099-R forms for 2021 (one from Fidelity and one from Prudential). For future years, only a single form will be issued. This ensures employees are aware of how to manage tax reporting(HP Inc_November 1 2021_…).

What resources are available to HP Inc. employees seeking assistance regarding their pension benefits, and how can they effectively utilize these resources to address their concerns? Knowing how to access support and guidance will empower HP Inc. employees to manage their retirement benefits proactively.

HP Inc. employees seeking assistance can access live customer support through Fidelity or contact Prudential directly after the transition. Additionally, the Welcome Kit will include important contact information for managing their benefits, making it easy for employees to address concerns(HP Inc_November 1 2021_…).

How can HP Inc. employees verify the financial health and stability of Prudential, and why is this factor important in the context of their pension benefits? Employees must ask how Prudential's financial standing influences their view of long-term pension security and what metrics or ratings they should consider.

HP Inc. employees can verify Prudential’s financial health by reviewing Prudential's annual financial reports, which are publicly available. Prudential’s strong financial ratings were a key factor in its selection, assuring employees of long-term pension security(HP Inc_November 1 2021_…).

What steps should HP Inc. employees take to update their personal information, such as banking details and tax withholding preferences, following the transition to Prudential? Understanding these processes will ensure a smooth continuation of benefits for HP Inc. employees as they adapt to the new system.

Employees do not need to re-submit their personal information to Prudential, as HP will securely transfer all necessary data, including banking and tax withholding preferences. This ensures the continuation of pension payments without the need for employee intervention(HP Inc_November 1 2021_…).

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HP Inc. plans to address potential financial changes through its contract with Prudential, which guarantees pension payments will remain the same. Prudential manages these risks as part of its core business, providing added security against economic volatility(HP Inc_November 1 2021_…).

In what circumstances might HP Inc. employees see changes in their net pension payments following the transition to Prudential, despite assurances that payment amounts will remain unchanged? This understanding will help employees manage their expectations regarding future payments and any adjustments they may need to make.

Employees might see changes in their net pension payments due to tax adjustments or changes in withholding instructions, but the gross payment amount will remain unchanged. Any garnishments or other deductions will continue as before, ensuring consistency in payment structure(HP Inc_November 1 2021_…).

How can HP Inc. employees contact the company directly to learn more about the pension transition process, and what channels are available for them to have their questions addressed? Clear communication lines are essential for HP Inc. employees to ensure they receive timely and relevant information regarding their pension situations.

HP Inc. employees can contact the company through the Fidelity support line or directly through Prudential for any questions about the pension transition. The Welcome Kit and other resources will provide contact details, ensuring employees have access to timely support(HP Inc_November 1 2021_…).