Navigating Retirement Finances: State Tax, Estate Tax, and IRMAA Considerations

The Pitti Group Wealth Management |

Retirement planning involves more than just choosing the ideal location for a peaceful and fulfilling life. It also requires a careful examination of the income tax, estate tax, and healthcare cost implications associated with living in specific states. In this article, we will explore the income tax and estate tax consequences of retirement location choices and delve into the impact of what some affectionately call Aunty IRMAA - The Income-Related Monthly Adjustment Amount for higher-income retirees.

1. State Income Tax: The state in which you can choose to retire can significantly impact your overall tax liability. While some states have no income tax, others may impose substantial rates. Consider states like Florida, Texas, Tennessee and Nevada, which do not levy state income tax. Retirees in these states can potentially enjoy more disposable income compared to counterparts residing in high-income tax states such as California or New York. 

2. State Estate Tax: Estate taxes vary across states, with some having their own estate tax separate from federal estate tax regulations. It's crucial for retirees to be aware of the estate tax thresholds in their chosen state, as this can influence estate planning decisions. There's a dozen or so states with no estate tax at death worth looking into and some that could tax your estate as much as 16%.

3. Tax-Friendly Retirement States: Certain states actively compete to attract retirees by offering tax incentives. States like Florida and Arizona not only lack income tax buy also provide additional benefits such as homestead exemptions and favorable estate tax policies. Retirees should research and consider relocating to tax-friendly states to optimize their financial situation in retirement. 

IRMAA for Higher-Income Earners: 

1. Understanding IRMAA: IRMAA, or Income-Related Monthly Adjustment Amount, is a component of Medicare that adjusts premiums based on an individual's or couple's modified adjusted gross income (MAGI). Higher-Income retirees may face increase Medicare Part B and Part D premiums if their MAGI exceeds certain thresholds. This can result in higher healthcare costs during retirement. 

2. IRMAA Thresholds: The IRMMA thresholds are determined based on income reported two years prior. The thresholds are categorized into different income tiers, and exceeding these thresholds can lead to higher Medicare premiums. Careful tax planning is essential to manage MAGI and potentially avoid or minimize the impact of IRMAA.

3. Strategies to Manage IRMAA: You can employ various strategies to mitigate the impact of IRMAA. These may include income deferral, strategic Roth IRA conversions, determining where income distributions are taken from, and charitable contributions. By understanding the rules and planning ahead, retirees can navigate the IRMAA landscape more effectively, ensuring the healthcare costs remain manageable throughout retirement. 

Discussing your thoughts and wishes with your financial advisor at The Pitti Group can help you not only choose the right state for retirement based on the financial implications, but also your lifestyle preferences, implications of state income tax, estate tax, and healthcare costs. Retirees must be proactive in understanding the tax landscape of potential retirement destinations and strategically plan to minimize tax liabilities. Additionally, awareness of programs like IRMAA is crucial for higher-income earners to manage healthcare expenses effectively. As retirees embark on this new chapter of life, a comprehensive understanding of these financial factors will contribute to a more secure and enjoyable retirement. Contact us at 585-337-4000 to learn more.


The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

This information is general in nature and should not be considered tax advice. Investors should consult with a qualified tax consultant as to their particular situation.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The Pitti Group Wealth Management, LLC (“The Pitti Group") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where The Pitti Group and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at