Why You Should Retire in PA and What To Know Before You Do (2024)

What Makes Pennsylvania the Best Place to Retire In

Yes, Pennsylvania offers many advantages to retirees. At almost 45 thousand square miles, Pennsylvania is one of the largest states in the country. It is also home to thecity of Lancaster, which U.S. News and World Report recently ranked asthe second best area to retire in the U.S. Several other cities in Pennsylvania also made the list.

Approximately 15.4 percent of Pennsylvania’s population is 65 years old or older and it is home to more than 870,000 veterans. The VA Medical Center in Lebanon County, PA, located near Cornwall Manor Retirement Community, is consistently ranked as one of the best veterans’ health care facilities in the country. Pennsylvania is also home to249 retirement communities.

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Pennsylvania Retirement Taxes and Perks

When looking for the right state to begin retirement, you may want to consider how the state taxes retirement income and savings. You’ll need to ask yourselfwhat type of income is taxed in PAso that you can stretch your retirement income as far as it will go. Pennsylvania provides a tax-friendly climate for retirees.

If you’ve asked yourself the question, “does Pennsylvania tax retirement income?”, then the answer is no! Pennsylvania does not tax its residents’ retirement income.Retirement incometypically consists of pooling income fromseveral different sources— social security, pension, individual retirement accounts (IRAs) and 401(k)s.It is one of only two states, and the only state on the East Coast, that considers pension income completely tax exempt.

The Keystone State also has the lowest flat tax rate in the country at just 3.07 percent.So, whileit is impossible to escape federal income taxeswhen you retire, you might lower your tax obligation by moving to a state like Pennsylvania where the income tax rate is low.

Does Pennsylvania Tax Social Security?

Retirees derive a portion of their income from Social Security depending on the amount of money they paid into the system while they were working, and their age when they retire. For instance, a person who retires at 75 will likely receive a higher monthly payment than someone who retires at 67. The earliest possible age for retirement is 62, but the full retirement age is 67. If you choose to retire early at 62, your monthly payments will be lower.

TheSocial Security Agency(SSA) determines if you’re qualified for these benefits based on credits you earn through working. Those born in 1929 or later must earn 40 credits, or work for 10 years to earn retirement benefits from the SSA. You accumulate these credits over time. You won’t lose credits during non-working periods, but you also won’t gain new credits.

Once you reach full retirement age, you can still work and earn your monthly benefits. However, your income from this work must remain below a certain threshold for you to continue earning benefits. Widows and widowers may be entitled to their spouse’s social security check by the age of 60 or 50 in the case of a qualifying disability.

The state of Pennsylvania does not tax social security income like some states, including West Virginia, Connecticut and Rhode Island.

Are Pensions Taxable in PA?

Pension funds are pools of money that companies collect to distribute to their workers upon retirement. Often, the assets from these funds are invested into assets like stocks and bonds to earn passive income. A group of trustees manages the money to ensure the fund maintains enough assets to pay the promised benefits to retirees. Many retirees today receive pension benefits, either from a public entity or private corporation.

The amount you receive is based on the terms of employment, the number of years you paid in and how well the pension fund was managed.In Pennsylvania, neither public nor private pensions are taxed, offeringan advantage over nearby states such as New Jersey, New York and Maryland, whichdotax pensions.When you retire and begin receiving pension benefits, you will pay federal taxes on them, but not PA taxes.

There are a few different payment options for pension funds — single-life annuity, joint and survivor annuity and lump-sum payments. Single-life annuity involves lifetime monthly payments for only the pensioner. Joint annuity payments cover lifetime benefits for the pensioner and their spouse. Some pension funds allow you to take a single lump-sum payment upon retirement instead of monthly benefits.

Most pension funds will allow you towithdraw payments starting at age 65. However, some funds will offer early retirement benefits as early as 55. You can learn more about the specifics of your pension plan from your employer.

Individual Retirement Account

If your employer did not offer a pension plan, you might have invested money in an IRA to use in retirement. IRAs offer different types of tax advantages on a federal level. Pennsylvania adds an additional tax benefit by not taxing the funds you take out of your IRA as income.

There are two main IRA structures that affect how the earnings are taxed federally. A traditional IRA is taxable upon withdrawal. When you make contributions to this fund, the amounts are tax-deductible, but the withdrawal amounts classify as income in retirement. A Roth IRA has taxable contributions, and the withdrawal amounts are tax-free upon reaching age 59 1/2.

Are 401(k) Contributions Taxable in PA?

Another retirement investment account, a 401(k), usually includes money you saved and matching funds from your employer. All employer contribution retirement plans are tax-free in Pennsylvania as income.

Employers will offer a percentage match of your income to add to the fund. You have the freedom to add more than the percentage match, but your employer will only contribute up to that matching amount. You may also have some freedom to decide what happens to the money in the fund. These retirement accounts will usually give you mutual fund options to determine how you invest your money.

The funds you have in your 401(k) will depend on your personal contribution habits and how well your employers matched your funds. You can start withdrawing from your 401(k) at 59 1/2 years old. If you withdraw before then, you’ll face an early withdrawal penalty.

When you are a resident of Pennsylvania, yourretirement income is tax exempt. Pennsylvania is one of the most generous states in the country for retirees’ income. They are also helpful when it comes to other taxes.

The state sales tax in PA is just six percent, which is one of the lowest in the country. Food and clothing are also exempt from state sales tax. Only Philadelphia and Pittsburgh, PA add a local tax on top of the state tax rates. There is another special exemption to sales tax in Pennsylvania that can have a great impact on seniors. All prescription and non-prescription drugs are tax exempt. Since the cost of medication tends to increase as you age, the state of Pennsylvania is doing what it can to keep those costs low.

Does Pennsylvania Tax Military Retirement Pay?

Pennsylvania proudly provides tax benefits for military service members and Veterans. Military retirement pay is not taxed as long as youhavefulfilled your years of service or reach retirement age. Military pay is also exempt from personal income tax for those serving in the PA Army National Guard or United States Army Reserve, even if their active duty service was performed outside of Pennsylvania.

If you receive Military Disability Retirement Pay as an annuity, pension or similar allowance due to sickness or injury resulting from your time in active service, it should not be included in taxable income as long as youmeet the criteria.

If you’re a survivor of a military service member who died while performing their duties, your Dependency and Indemnity Compensation (DIC) is a benefit that is not taxed as long as you live in Pennsylvania.

Property Taxes in Pennsylvania

When you reach retirement age, your house may be paid off. Your living expenses would be reduced to property maintenance and taxes. In some states, retirees are quick to downsize to lower their tax burden. In other states with high taxes, property taxes on a single-family home can represent a large part of the retirement budget.

Many homeowners hold their property taxes in escrow, which means they pay toward them each month with their mortgage payment. When the mortgage is paid off, and the taxes are collected twice a year, the amount can be shocking. Many communities across the country are struggling with budget shortfalls and are raising taxes to try to close the gap.

In Pennsylvania, if you are over 65, you may be eligible for a rebate on your housing costs, whether you own or rent your home. For seniors who own their home and do not exceed$35,000 in annual household income, the average propertytax rebate is $650.With supplemental rebates, that amount can increase. Income calculations to determine eligibility exclude50 percent of incomethat comes from social security and Railroad Retirement benefits.

Property taxes for seniors in Pennsylvania are calculated in their favor. Even renters are eligible for a housing rebate if theirincome is under $15,000.The same exemptions apply in determining the total amount of income.

At a retirement community such as Cornwall Manor, residents do not pay property taxes.

Pennsylvania Inheritance and Estate Taxes

The amount of taxes charged on your estate can significantly impact the legacy you leave for your children and other heirs. Estate taxes may make it difficult for you to transfer family wealth or property to succeeding members of the family. The most substantial portion of the inheritance and estate taxes is that imposed by the state.

The state of Pennsylvania does not charge an estate tax for spouses or direct heirs aged 21 or younger.The inheritance tax is based on the relationship to the deceased. A direct heir, a child or grandchild, will see their inheritance taxed at a rate of 4.5 percent. Siblings of the departed will pay 12 percent in inheritance taxes.

All non-relatives or family members of indirect lineage have an inheritance tax of 15 percent. Many of thesurroundingstates have an estate tax, and some have both an estate and an inheritance tax. Maryland and New Jersey have both. New Jersey has the second highest inheritance tax rate at 16 percent and the lowest exemption threshold for an estate tax.

If you choose to leave part of your estate to a charity, Pennsylvania does not charge charitable organizations an inheritance tax. Nonprofits, government entities and some institutions are exempt from inheritance tax in Pennsylvania. Also, any part of the estate left to a spouse is tax-exempt, and property owned jointly by spouses passes to the surviving spouse without a tax by the state. At the death of a minor child, the parent will not pay taxes on any inheritance.

The tax climate of the state in which you are a resident can impact your children and grandchildren and the legacy you leave them. Pennsylvania is one of the most lenient taxing authorities in the country, making it financially advantageous to move there for retirement.

Who Should Retire to Pennsylvania?

• If you are ready to retire but are still active, PA is the right place for you. Here, there is so much to do and see that you’ll never get bored.
• If you have a pension, 401(k) or social security income that you want to make the most of, PA is the state where you should retire. Living in Pennsylvania makes your retirement income go further.
• If you have children and grandchildren who will want to visit you, Pennsylvania is a convenient place to travel. Philadelphia and Pittsburgh, PA are both major cities with transportation hubs. PA is also close to New York City and New Jersey, making it easy to travel in and out.
• If you enjoy moderate weather, you will be comfortable in PA, where the summers are warm, and the winters are tolerable. With cool summer nights in the mountains and sunny winter days on the ski slopes, Pennsylvania seldom sees extreme weather.
• If you have an interest in American history, you can immerse yourself in historical sites in PA. Every city and town in Pennsylvania contains timeless architecture and stories from the Civil War or before. PA was an essential part of the founding of this country, and evidence of that fact is scattered around the state.
• If you want to leave the busy, crowded city after you retire, PA is the place to enjoy your retirement in rural splendor. There is plenty of farmland, green trees and winding country roads to let you spread out away from the crowd.
• If you want to stay connected to a major city for work after retirement or just to enjoy the cultural offerings, Pennsylvania is the right location for you. You can enjoy the tax benefits and elbow-room of the rural atmosphere and still travel into the city with ease.
• If you need access to high-quality medical care after retirement, you will find everything you need in PA. Central PA is home to first-class medical facilities such as Penn State Hershey Medical Center; Penn Medicine/Lancaster General Health; the VA Medical Center; UPMC; Pinnacle and WellSpan health care systems.

Retirement Age in Pennsylvania

The retirement ageis the same in every state. For those born in 1960, thefull retirement age according to the Social Security Administration is 67. This means you can receive 100 percent of your social security benefits without any reductions. Beneficiaries receive 50 percent of their spouse’s retirement benefits when they reach 67 years of age.

If needed, the earliest someone can begin receiving social security retirement benefits is at 62. However, the rate is reduced, and they will only get 70 percent of their own monthly benefits and 32.5 percent of their spouse’s retirement benefits. As each month passes, the percentage of their retirement benefits grows until it reaches the full amount at age 67.

What Is the Retirement Age in PA for State Employees?

Pennsylvania’s statewide State Employees’ Retirement System, or SERS, is one of the oldest and largest retirement plans for state employees in the country. When the state first hires an employee or when they get close to retirement age, they have lots of decisions to make about their retirement benefits, including at what age they wish to retire.

TheSERS normal retirement age is 65, 60, 55 or 50 years of age, depending on what class of service you were in. A SERS employee’s class of service is determined by when they became a memberand the type of work that they did. The annual pension for SERS members is calculated with a formula that includes a few variables about your service as a state employee, including:

• Class of service
• Years of credited service
• Final average salary

Why Choose Pennsylvania For Your Retirement?

Deciding where to retire requires careful planning and some research. You want to go where you will be comfortable, where you can enjoy your life and where your retirement income will buy you the most. To do that, you need to look at the housing market, cost of living, the tax structure, the climate and the proximity of healthcare services.

Pennsylvania can be a great place to start your retirement living journey with Cornwall, PA being the best suburb in PA to retire in! Just ask the retirees who are already living there. A few of the positive features to those who call Pennsylvania home include:

1. No Income Tax on Retirement Income: While the state does tax income from active employment — even if you are retired from your primary job — Pennsylvania does not tax any of the traditional retirement income fundssuch as social security, pension, individual retirement accounts (IRAs) and 401(k)s.
2. Low Sales Tax:Your retirement budget will stretch further in Pennsylvania with a sales tax rate of six percent. With food, clothing and heating fuel exempt from sales tax, you have a significant financial advantage in the Keystone State.
3. Access to Restorative Care & Healthcare Facilities: Pennsylvania has an assortment of VA hospitals and other medical facilities that offer state-of-the-art healthcare services, including world-renowned health systems such as Penn State/Hershey Medical Center; Penn Medicine and UPMC.
4. Change of Seasons:The geography of Pennsylvania is varied, and there are four distinct seasons that provide a variety of weather and beauty. Pennsylvania is renowned for having the most beautiful and long-lasting fall foliage in the country that provides a spectacular display of color in autumn.

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Attractions of The Keystone State

The Keystone State attracts tourists from around the world. Pennsylvania is full of American history and cultural opportunities. Here are some attractions to consider in PA:

• World Series: The Little League World Series is played in Williamsport, PA every summer. This long-standing little league contest attracts sports fans from around the world. The city of Williamsport, PA holds a week-long celebration to mark the occasion.
• Historic architecture: As the first capital of the United States, Philadelphia, PA includes some historic buildings and monuments, like the Liberty Bell. The Capitol Rotunda in Harrisburg, PA is considered one of the most beautiful capitol buildings in the country as well. Cities and towns across Pennsylvania – including Lancaster and Lebanon near Cornwall Manor Retirement Community – are dotted with grand historic architecture.
• Art scene: Pennsylvania is full of world-class museums, historic theaters and spectacular music venues. Philadelphia and Pittsburgh, PA both offer a mix of styles and flavors to attract any art aficionado. The smaller cities include unique art venues all their own too.
• Craft beer and wineries: Pennsylvania is home to the most craft breweries in the country, and people may be surprised to know that the state is also home to many vineyards and wineries. If you prefer a non-alcoholic beverage, indulge in the many coffee shops in the state.

• Big cities: Pennsylvania is home to several major cities including Philadelphia, PA which ranked as the 19^th best retirement city and Pittsburgh, PA which earned the eighth spot. Cornwall, PA is located just five miles from the PA Turnpike and is just a two-hour drive from the downtown area of Philadelphia, 30 minutes from Lancaster, and 20 minutes to Hershey, PA.
• Historic sites: One of the defining battles of the Civil War was fought in Gettysburg, PA. The area is now home to many war-related remembrances and historic sites. You can take a battlefield tour, visit the Gettysburg National Military Park Museum and brush up on your Civil War history.

• Amish village: Lancaster County is home to one of the largest Amish communities in the country. In addition to seeing Amish men driving their horse-drawn wagons down the streets, you can also learn about the Amish way of life at The Amish Village. The city of Lancaster was also ranked as the second best city in the country to retire by S. News and World Report. While you’re there, enjoy groceries and fresh produce from local farmers’ markets.
• Beautiful mountains: The Poconos in Northeastern PA is a traditional resort region that draws visitors from all over. The area combines the best hiking trails with opportunities for camping, fishing and outdoor adventures with resort hotels and attractions for the whole family. The Poconos also features several amusem*nt parks, ski resorts and romantic retreats.
• Amusem*nt parks: Another well-known amusem*nt park is Hersheypark. The whole town of Hershey was built around the chocolate industry and still smells like chocolate. The street lights are shaped like Hershey Kisses, and the city plays host to visitors year-round. The amusem*nt park itself offers a historical look at the iconic chocolate company, along with rides and food.
• Lifelong learning: Pennsylvania has an abundance of colleges and universities that offer a wide array of learning and cultural opportunities for older adults.

Pennsylvania has a wide variety of attractions, cultural opportunities and amusem*nts. Whether you enjoy outdoor sporting activities or educational tours, there is always plenty to do when you retire in PA.

Retiring in Pennsylvania offers many advantages, from tax benefits to attractions. The economic climate in PA for retirees is conducive to a comfortable retirement living where you can enjoy rightsizing your life and making the most of the money you’ve saved. The geography in PA includes mountains, rivers and great opportunities to enjoy your retirement by doing what you love especially in the fall foliage! Pennsylvania is also one of the oldest states and is full of historic sites and architecture.

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Call Pennsylvania Home For Your Retirement

When you are planning your retirement, look for a retirement community such as Cornwall Manor in the state of Pennsylvania. Cornwall Manor offers a variety of housing options with healthcare and other related services. Cornwall Manor was voted “Best Retirement Community”, “Best Personal Care” and “Best Nursing Home” by the Lebanon Daily News. Residents of the Continuing Care Retirement Community include people who have moved from down the road and across the country.

Cornwall Manor is one of many reasons to consider Pennsylvania for your retirement.

Contact Cornwall Manor online or call 717-274-8092 to learn more about our community and to request a tour – or stay the night as our guest to explore the area and see why PA is such a wonderful place to call home.