New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

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

Target 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 Target 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 Target 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. Target 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 Target 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 Target 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 Target 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. Target 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. Target 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 Target 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.

Featured Video

Articles you may find interesting:

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

What are the key benefits provided by Target Corporation's Personal Pension Account and Traditional Plan for employees approaching retirement, and how do these plans ensure financial security during retirement years? Understanding the synergy between these two plans is essential for retirees, as they work together alongside Social Security and personal savings to replace a portion of an employee's paycheck after retirement.

Key Benefits of the Personal Pension Account and Traditional Plan: Target Corporation's pension plan includes two components: the Personal Pension Account and the Traditional Plan. These plans work in tandem to replace a portion of an employee's paycheck during retirement. The Personal Pension Account provides pay credits and interest that accumulate over time, while the Traditional Plan uses a final average pay formula. Together with Social Security and personal savings, these plans help ensure financial security in retirement(Target Corporation_Dece…).

How can employees elect different payment options, such as the Single Life Annuity or the Joint and Survivor Annuities, within Target Corporation's pension plans? It is crucial for employees to grasp not only the financial implications of these choices but also the necessary spousal consent required when designating a joint annuitant, particularly if the chosen joint annuitant is not the employee's spouse.

Payment Options and Spousal Consent: Employees can elect different payment options, including the Single Life Annuity, which provides the highest monthly benefit and ceases at the retiree’s death, or the Joint and Survivor Annuity, which continues payments to a surviving spouse. To elect a non-spouse as a joint annuitant, spousal consent is required, and this must be notarized to ensure compliance with plan rules(Target Corporation_Dece…).

In what circumstances might benefits not be paid under the Traditional Plan, and what steps can employees take to ensure they remain eligible for their pension benefits upon termination of employment? Target Corporation's policy outlines several scenarios where benefits could be denied, making it necessary for employees to be proactive in understanding their rights and responsibilities concerning plan participation.

Circumstances for Denial of Benefits under the Traditional Plan: Benefits under the Traditional Plan may not be paid if an employee leaves before becoming vested (less than three years of service). Employees should ensure they meet the vesting requirements and maintain eligibility by avoiding termination before they reach the minimum service period(Target Corporation_Dece…).

What procedures should employees follow to report changes in marital status, address, or beneficiaries to ensure compliance with the requirements of Target Corporation's pension plan? Employees must understand the importance of timely reporting these changes to avoid potential issues with their retirement benefits and ensure that their pension plan information remains up-to-date.

Reporting Changes in Marital Status or Beneficiaries: Employees must promptly report changes in marital status, address, or beneficiaries to Target's Benefits Center to ensure their pension records remain up-to-date. Failing to do so can lead to delays or issues in processing pension benefits(Target Corporation_Dece…).

How does Target Corporation determine the final average pay used to calculate retirement benefits under its pension plans, and what factors may affect this calculation? Employees nearing retirement should be fully informed about how their compensation is considered in determining their pension benefits, including aspects such as bonuses and overtime that may influence their final average pay calculation.

Final Average Pay Calculation: Target Corporation calculates final average pay based on the five highest years of earnings out of the last 10 years of service. This includes regular pay, overtime, bonuses, and commissions but excludes items like workers' compensation or long-term disability payments(Target Corporation_Dece…).

How can employees begin the process of rolling over their Target 401(k) accounts into the Pension Plan, and what advantages does this Pension Purchase Program offer? Understanding this rollover option is vital for maximizing retirement benefits, as it can provide employees with a stable income stream while avoiding unnecessary fees typically associated with purchasing annuities outside the plan.

Rolling Over 401(k) into the Pension Plan: Employees can roll over their 401(k) accounts into the Pension Plan using the Pension Purchase Program. This option offers several advantages, including avoiding fees associated with purchasing annuities outside the plan and receiving a stable income stream during retirement(Target Corporation_Dece…).

What are the implications of a participant's age and joint annuitant's age on the payment amounts under the various Joint and Survivor Annuity options at Target Corporation? Employees should be aware of how age differences can impact their pension payouts, as the specific percentages payable under these options may vary based on the ages of both the participant and their designated joint annuitant.

Effect of Participant and Joint Annuitant’s Age on Payments: The Joint and Survivor Annuity options are influenced by the ages of both the participant and the joint annuitant. The younger the joint annuitant, the lower the monthly payout due to actuarial adjustments. Employees should consider these factors when selecting an annuity option(Target Corporation_Dece…).

How are retirement benefits managed during potential plan terminations or amendments at Target Corporation, and what protections are in place for employees in these scenarios? Employees should be well-informed regarding their rights in the event of changes to the pension plan, including how benefits would be distributed and under what circumstances they may remain fully vested.

Plan Terminations or Amendments: In case of plan terminations or amendments, vested benefits are protected, and employees will receive their earned pension. If the plan is amended or terminated, Target ensures that vested benefits are distributed according to the plan's terms(Target Corporation_Dece…).

For employees retiring or leaving Target Corporation, what options are available with respect to unused vacation time and how might this be factored into pension calculations? Understanding how accrued time off translates into benefits could have a significant impact on an employee's financial positioning upon retirement.

Unused Vacation Time and Pension Calculations: Unused vacation time does not directly affect pension benefits but can be included in eligible earnings calculations that determine final average pay. Employees nearing retirement should consult with Target’s Benefits Center to understand how unused time may impact their overall benefits(Target Corporation_Dece…).

How can employees contact Target Corporation for assistance with their retirement benefits to address any questions or concerns they may have about their pension plans? Accessing the right resources and support is essential for employees to navigate their retirement benefits effectively. They can reach out to the Target Benefits Center at 800-828-5850 for more specific inquiries related to their personal circumstances. These questions aim to enhance employees' understanding of their retirement benefits, ensuring they are well-prepared for their transition into retirement.

Contacting Target for Pension Assistance: Employees can contact the Target Benefits Center at 800-828-5850 for assistance with their retirement and pension plans. This center provides support with any questions related to pension options, payments, and administrative requirements(Target Corporation_Dece…).

Additional Articles

Check Out Articles for Target employees

For more information you can reach the plan administrator for Target at 10 South Dearborn Street 48th Floor Chicago, IL 60603; or by calling them at 1-800-440-0680.